MAIN EVENTS OF THE YEAR Passenger numbers at Dublin, Shannon and Cork airports increased by 4.3% to 19.3 million – a new record Dublin Airport was one of the fastest growing major airports in Europe and now has over 15 million passengers €96 million was invested by the Group in infrastructure Over 80 airlines served 138 routes. 18 new routes were launched to North America, Continental Europe and the UK Group profit after tax was €36.2 million compared to €11.6 million in 2001, generated on revenues of €421 million Aer Rianta International recorded a profit after tax of €13.2 million An Taoiseach, Bertie Ahern T.D., opened the new terminal extension at Dublin Airport in June Customer service level agreements were developed with airlines and ground handlers at Dublin Airport and a Passenger Services Council was established at the Airport to enhance passenger service standards A major internal re-structuring programme continued including the extensive application of new technologies A €15 million restoration and refurbishment programme was completed at Killarney Great Southern Hotel The 2002 annual report and information on Aer Rianta can be found on our official website www.aerrianta.com CONTENTS Board of Directors 02 Group Structure & Management Team 03 Chairman’s Statement 04 Chief Executive’s Review 12 Review of the Year 16 Airport Management 17 Airport Retailing 22 Aer Rianta International 24 Great Southern Hotels 26 1 Human Resources 28 Ancillary Activities 30 Financial Review 32 Route Network 36 Directors’ Report & Financial Statements 37 Five Year Business Summaries 70 General Business & Aeronautical Information 74 NOEL HANLON Noel Hanlon was first appointed Chairman of the Board in October 1994 and was re-appointed for a second term in October 1999. Noel is also Chairman of subsidiary companies, Aer Rianta International cpt, Aer Rianta Finance plc, Aer Rianta Operations Ltd and Great Southern Hotels Ltd. He is Deputy Chairman of Birmingham Airport Holdings Ltd and Birmingham International Airport Ltd. He is Chairman of the Remuneration, Health & Safety and Security Committees. BOARD OF DIRECTORS CECIL BRETT JOHN BURKE PETER DUNNE Cecil Brett was appointed to the Board John Burke was appointed Chief Executive in Peter Dunne was first appointed to the on 1 January 2002 under the Worker March 1998 and as a member of the Board in Board in January 1994 under the Participation (State Enterprises) Acts, September 1998. John is a Director of Aer Worker Participation (State Enterprises) 2 1977 and 1988. Cecil is a Director Rianta International cpt, Great Southern Hotels Acts, 1977 and 1988 and was re- of Aer Rianta International cpt and Ltd and Chairman of Aer Rianta International appointed in January 1998 and January Chairman of the Irish Parking (North America) Inc. John is a member of the 2002. Peter is a Director of Aer Rianta Association. He joined the company in Supervisory Board of Düsseldorf Airport and is International cpt and Aer Rianta 1974 and works as Project Director - a Vice President of Airports Council International (North America) Inc. Car Parks, Dublin Airport. Cecil is International (ACI) Europe and a member of Peter joined the company in 1971 and a member of the Health & the World Governing Board of ACI. He is also a works in the Maintenance Department Safety Committee. member of the national executive council of at Dublin Airport. Peter is a member of IBEC. John is a member of the Health & Safety the Health & Safety Committee. and Security Committees. PAT FITZGERALD FREDA HAYES LIAM J. MEADE Pat Fitzgerald was first appointed to the Freda Hayes was appointed to the Board Liam Meade was appointed to the Board in Board in January 1994 under the Worker in June 2001. Freda is Chief Executive of April 2001. Liam is a Director of Aer Rianta Participation (State Enterprises) Acts, Blarney Woollen Mills Group. Freda is a International cpt and Aer Rianta International 1977 and 1988 and was re-appointed in Director of Aer Rianta International cpt (Middle East) W.L.L. He is currently Vice January 1998 and January 2002. Pat is a and Lenrianta JSC. Freda is also a Director President, Marketing with Shannon Engine Director of Aer Rianta International cpt. of IBEC and the Small Firms Association. Support Ltd, a Shannon-based aircraft engine Pat joined the company in 1966 and works She is a Life Fellow of the Irish leasing concern. Liam holds Board in the Catering Department at Shannon Management Institute. Freda is a memberships in a number of Irish aviation- Airport. Pat is a member of the Board member of the Board Audit and related companies and previously held the Audit and Health & Safety Committees. Remuneration Committees. position of Executive Vice President with GPA Group plc and has a long and varied career in international aviation management, including 10 years in the United States. Liam is Chairman of the Board Audit Committee and is a member of the Remuneration Committee. Dublin Airport Shannon Airport Cork Airport GROUP STRUCTURE Aer Rianta International Great Southern Hotels Airports Airport Retailing Cork Airport Corrib Birmingham Europe Cyprus / Greece Dublin Airport Düsseldorf Eyre Square CIS Moscow / St. Petersburg / Kiev Hamburg Killarney 3 Middle East Parknasilla Bahrain / Beirut / Kuwait / Oman / Qatar Rosslare North America Shannon Airport Montreal / Edmonton / Winnipeg / Ottawa / Halifax City Hotel, Derry MANAGEMENT TEAM JOHN BURKE RAY GRAY ALAN LEVEY FRANK O’CONNELL Chief Executive Director - Finance General Manager - Director - Retail Safety & Aviation Standards MARGARET SWEENEY TOM HAUGHEY JOE O’CONNOR Deputy Chief Executive Director - Market EAMONN MCKEON Director - Development & Strategy Chief Executive - Cork Airport OLIVER CUSSEN Great Southern Hotels Director - DAVID HEPBURN JOHN O’MAHONEY Corporate Affairs & General Manager - EAMONN MORAN Group Chief Accountant Company Secretary Community Affairs & General Manager - Environment Aviation Security TONY SWEENEY EAMON FOLEY General Manager - Director General - ROBERT HILLIARD MARTIN MORONEY Group Internal Audit Aer Rianta International Director - Dublin Airport Director - Shannon Airport VINCENT WALL MARK FOLEY DAMIAN LENAGH MICHAEL MURPHY Director - Director - Group Head - Human Resources General Manager - Communications Capital Programmes Group Property Noel Hanlon, Chairman Aer Rianta is recognised as one of Ireland’s most important Aithnítear go bhfuil Aer Rianta ar cheann de na cuideachtaí is Chairman’s Statement Ráiteas an Chathaoirligh and progressive companies. It manages and operates tábhachtaí agus is mó dul chun cinn in Éirinn. Riarann sé agus Dublin, Cork and Shannon airports on behalf of the láimhseálann sé Aerfoirt Átha Cliath, Chorcaí agus na Government. It also has significant investments in Sionainne ar son an Rialtais. Freisin, tá infheistíochtaí Birmingham, Düsseldorf and Hamburg airports. Aer Rianta éifeachtacha aige in Aerfoirt Birmingham, Düsseldorf agus may be said, without exaggeration, to have realised the Hamburg. Is féidir a rá, gan bhréag gan áibhéil, gur eirigh le original vision of Sean Lemass i.e. a company in public Aer Rianta radharc bunaidh Sheáin Lemass a bhaint amach, ownership, operating on a strictly commercial basis, while i. cuideachta in úinéireacht phoiblí ag oibriú go beacht ar delivering effectively a key component of the country's bhonn tráchtála, agus ag an am céanna, ag cur ar fáil go economic well-being, namely airport infrastructure. héifeachtúil comhpháirt tábhachtach de leas eacnamaíoch na 5 tíre, is é sin bonneagar aerfort. We are regarded as one of the top five duty-free retailers in the world with operations in 14 different countries Meastar go bhfuilimid ar cheann den cúig miondíoltóirí saor including Russia, Canada, the Middle East, the Ukraine and ó dhleacht is mó clú sa domhan, le gníomhaíochtaí i 14 tíortha Cyprus. We are also involved in the hotel industry through éagsúla, an Rúis, Ceanada, an Meán-Oirthear, an Úcráin agus our ownership of the Great Southern Hotel Group, which an Chipir san áireamh. Tá baint againn freisin le tionscal na comprises nine hotels, one of which is a new hotel in Derry n-óstlann trínár n-úinéireacht Ghrúpa Mór Óstlanna an and in which we have a 25% shareholding and a Deiscirt; tá naoi n-óstáin sa Ghrúpa, ceann de is ea óstán nua management franchise. The remainder are 100% owned. i nDoire; tá 25% scairshealbhóireacht agus ceadúnas bainisteoireachta againne san óstán seo. Tá an chuid eile The Group has more than 3,400 employees and has been 100% inár n-úinéireacht. continuously restructuring, with reorganisation of work practices and extensive application of modern technology. Tá níos mó ná 3,400 fostaithe ag an Grúpa agus tá athchóiriú This enables us to compete effectively in the rapidly á dhéanamh aige i gcónaí, le atheagar i gcleachtaí oibre agus changing business environment in which we operate. in úsáid teicneolaíochta nua-aoisigh. Cabhraíonn sé sin linn Our success has been achieved through strong dul in iomaíocht go h-éifeachtúil i dtimpeallacht ghnó atá ag partnerships with staff and trade unions. athrú go tapaidh agus ina bhfuilimid ag obair. D’eirigh linn san obair seo trí pháirtíochtaí láidre leis an bhfoireann agus na The Board fully recognises and accepts the right of the ceardchumainn araon. Minister and Government to make policy decisions that affect the organisation. The Board currently has the Aithníonn an Bord é go hiomlán agus glacann sé go bhfuil sé statutory responsibility for formulating and implementing de cheart ag an Aire agus an Rialtas breitheanna polasaí a policy for the management and development of the dhéanamh a mbaineann leis an eagraíocht. I láthair na huaire tá airports. It also has a responsibility to its shareholder to an cúram reachtúil ar an mBord polasaí a dhéanamh agus a ensure that there is no diminution of shareholder value. chur i bhfeidhm le haghaidh bainisteoireachta agus forbartha The Board is concerned that present proposals being na n-aerfort. Tá sé freagrach freisin dá scairshealbhóir chun formulated by the Department of Transport may result in a deimhin a dhéanamh de nach mbeidh laghdú i luach significant reduction in shareholder value and could scairshealbhóireachta. Tá imní ar an mBord go mbeidh laghdú dissipate what the Board considers to have been a mór i luach scairshealbhóireachta de bharr tairiscintí atá á successful national airport strategy. As Aer Rianta ullmhú faoi láthair ag an Roinn Iompair, agus go ndéanfar continues to have statutory responsibility for the three straitéis aerfort náisiúnta, a mheasann an Bord a bheith rathúil, airports, it is appropriate that it should comment on any a scaipeadh. Ós rud é go bhfuil cúram reachtúil leanúnach ag proposals, which may have these risks. Aer Rianta i gcomhair na dtrí aerfort, is cuí go dtabharfadh sé a thuairimí ar aon tairiscintí ina mbeadh na priacail seo. Following his appointment last June, the Minister for Tar éis a cheapacháin an Meitheamh seo caite, d’fhógair an Transport, Séamus Brennan T.D., announced a number of t-Aire Iompair, Séamus Ó Braonáin, TD, roinnt tionscnamh a initiatives that could impact on the structure and funding d’fhéadfadh tionchar a bheith acu ar structúr agus requirements of Aer Rianta. These relate principally to the riachtanais maoinithe Aer Rianta. Baineann saidsean i provision of greater autonomy for Cork and Shannon gcoitinne le soláthar féinrialach níos mó do Aerfoirt Chorcaí airports and the possible construction of a terminal or agus na Sionnaine agus le tógáil críochfoirt nó críochfort ag terminals independent of Aer Rianta at Dublin Airport. Aerfort Átha Cliath, gan aon bhaint a bheith acu le Aer Regardless of what decision is taken by the Government on Rianta. Gan cuimhneamh ar socrú an Rialtais maidir le 6 the issue of the independent terminal at Dublin Airport, Aer críochfort neamhspleách ag Aerfort Átha Cliath, tá Rianta under current legislation has a statutory obligation oibleagáid reachtúil ar Aer Rianta, faoi reachtú atá ann, le for the development and management of the Airport. There haghaidh forbartha agus bainisteoireachta an aerfoirt. is an urgent need to move forward with the construction of Tá geárghá le tógáil Píara D a chur chun cinn, rud a Pier D for which planning permission has recently been fuarathas ceadú pleanála dó le déanaí, ionas nach dtárlóidh obtained so that the chaos that reigned at Dublin Airport in arís an t- anord a bhí ag Aerfort Átha Cliath sna nóchaidí the late nineties does not recur. This chaos was clearly the deireanacha. Tá sé follasach gur eirigh an t-anord seo nuair result of Aer Rianta not being allowed to proceed with the nár cheadaiodh do Aer Rianta dul ar aghaidh leis an clár building programme in accordance with the Board’s foirgníochta de réir tola an Bhoird. Tá sé ar intinn ag an wishes. The Board is determined that as long as statutory Bord nach dtárlóidh seo arís fad is atá freagracht reachtúil responsibility rests with them that this will not recur. fúthu. Dúirt Mahatma Gandhi tráth éigin ‘braitheann an Mahatma Gandhi once said, “the future depends on what tódhchaí ar cad a dheimimid sa láithreach’. Ní bhaineann we do in the present”. Nowhere does this apply more seo in aon áit eile chomh mór is a bhaineann sé le Aer than to Aer Rianta and so we must move forward with our Rianta , agus mar sin, caithfimid dul ar aghaidh lenár gclár development programme in a clear and constructive forbartha i gcaoi atá soléir agus éifeachtach. Ni chuirfidh manner. The construction of Pier D will not in any way tógail Píara D isteach i sli ar bith le tógáil críochfoirt interfere with the construction of an independent terminal neamhspleách má is é seo breith an Rialtais. should the Government so decide. I nDeireadh Fómhair 2002 d’fhógair an t-Aire bunú painéil In October 2002 the Minister announced the establishment triúr-fear chun comhairle a thabhairt dó maidir le leibhéal of a three-man panel to advise him as to the level of private spéise san earnáil príobháideach i dtógáil críochfoirt sector interest in the building of an independent terminal neamhspleách ag Aerfort Átha Cliath agus inmharthanacht at Dublin Airport, and the viability of such a proposal. tairisceana mar seo. Seoladh an tuarascáil seo chuig an This report was delivered to the Minister in February 2003 Aire i Feabhra 2003 agus do thaispeáin sé go raibh tógáil and indicated that from both a technical and operational críochfoirt neamhspleách indéanta, de réir gné teicniúla standpoint, the construction of an independent terminal agus oibríochta. Do chruthaigh an tuarascáil freisin go was possible. The report also concluded that Aer Rianta’s raibh na táillí aerfort faoi láthair ag Aerfort Átha Cliath fíor- existing airport charges at Dublin Airport were extremely iomaíoch agus de réir dealraimh go mbeadh méadú i dtáillí competitive and that airport charges, whether levied by aerfort, cibé gearrtha ag Aer Rianta nó ag oibreoir Aer Rianta or a private operator, would likely increase príomháideach, tar éis tógála críochfoirt nua agus following the building of a new terminal and other bonneagair riachtanaigh eile. necessary infrastructure. It is Aer Rianta’s firm belief that the future development Is é tuairim cinnte Aer Rianta go mbeidh forbairt na dtrí of Ireland’s three principal airports is best secured by bpríomhaerfort Éireannach as seo amach caomhnaithe sa the strong operational, marketing and financial leverage, slí is fearr, trí neart láidir oibríochta, margaíochta agus which the Group structure provides, while at the same airgeadúil, rud a sholáthraíonn structúr an Ghrúpa, agus ag time ensuring the broadest possible level of management an am céanna ag déanamh deimhin de go bhfuil an leibhéal autonomy at individual airport level. It is also the féinrialach bhainisteoireachta is leithne ag aerfoirt company’s view that the growth and funding challenges aonaracha. Is é dearcadh na cuideachta freisin go mbeidh faced by Dublin Airport in particular and the customer oibreoir aonarach aerfoirt in ann an cuibheas is fearr a service requirements of its airline and passenger sholáthar maidir leis na dúshláin fáis agus maoinithe atá ag consumers, would be best served by a single Aerfort Átha Cliath go háirithe agus le riachtanais a aerlínte airport operator. agus a chustaiméirí. However such decisions are solely a matter for our Ar aon chuma, baineann a leithéid de cheisteanna lenár shareholder. For Aer Rianta’s part, the company is scairshealbhóir amháin. Maidir le Aer Rianta, tá an participating fully in the consultation process initiated by chuideachta ag glacadh a lánpháirte sa phróiseas Government to assess the views of all key stakeholders on comhairleoireachta atá bunaithe ag an Rialtas chun tuairimí the future of Dublin Airport. We are confident that the iad-san go léir go bhfuil baint acu leis, a mheasúnú maidir management and staff of the company, which have always leis an rud atá i ndán do Aerfort Átha Cliath. Tá dearcadh responded positively to the competitive and fast-changing dearfach ag bainisteoireacht agus foireann na cuideachta i nature of the aviation industry in the past, will do so again gcónaí maidir le iomaíoch agus luathathrú an tionscail whatever the future brings. eitlíochta agus tá muinín againn go mbeidh sé sin acu arís, pé rud a thaganns. The year 2002 proved a very challenging period for Aer Rianta. The impact of the terrorist attacks in the United Tréimhse an-dúshlánach a ba an bhliain 2002 do Aer Rianta. States the previous September and slower global Tháinig tionchar na sceimhlitheoireachta ins na Stáit economic activity, had a negative effect on the aviation Aontaithe an Meán Fómhair roimhe agus laghdú i industry generally. Nonetheless and despite the anticipated ngníomhaíocht eacnamaíoch domhanda le chéile chun 7 reduction in transatlantic traffic, a record 19.3 million éifeacht diúltach a sholáthar don tionscal eitlíochta i gcoitinne. passengers travelled through the Group’s airports at Mar sin féin, agus in ainneoin an laghdú a táthar ag súil leis Dublin, Shannon and Cork, an increase of 4% over 2001. i dtrácht trasatlantach, bhain 19.3 milliún paisinéir (figiúr nár sáraíodh cheana) úsáid as Aerfoirt an Ghrúpa ag Áth Dublin Airport was one of a small number of capital city Cliath, Sionainn agus Corcaigh, méadú 4% ar 2001. airports throughout Europe to register any growth in passenger traffic last year, a very creditable performance in Bhí Aerfort Átha Cliath ar cheann de roinnt bheag de aerfoirt the circumstances. Overall numbers rose by 5% to a new in ardchathracha ar fud na hEorpa go raibh aon mhéadú ann high for the Airport of 15.1 million. i líon na bpaisinéirí anuraidh, éacht an-mheasúil agus cúrsaí amhlaidh. Bhí méadú 5% i líon iomlán na bpaisinéirí, go buaic nua 15.1 milliún don aerfort. As expected, Shannon suffered from reduced activity on the Mar a bhí súil leis, d’fhulaing Sionainn ó ghníomhaíochtaí North Atlantic but still had a very resilient outturn with laghdaithe ar an Atlantach Thuaidh, ach mar sin féin, bhí passenger numbers slipping by just 2% to 2.35 million. toradh an-mhaith ag an aerfort, le líon na bpaisinéirí ag Cork enjoyed a 6% rise in throughput to a record level of 1.9 caolú 2% díreach, go dtí 2.35 milliún. Bhí méadú 6% ag million passengers. The launch of new routes and services to Corcaigh go leibhéal nár sáraíodh cheana, go dtí 1.9 milliún North America, Continental Europe and the UK continued to paisinéir. Le tosnú bealach agus seirbhísí nua go Meiriceá expand the network of destinations served by the Group’s Thuaidh, Mór-Rionn na hEopra agus an Ríocht Aontaithe, tá three airports. gréasán na gceannscríbe atá ar sceideal trí aerfort an 8 Ghrúpa, ag méadú i gcónaí. Infrastructural Development In line with its statutory obligations under the Air Forbairt Bhoinneagair Navigation and Transport (Amendment) Act, 1998, De réir a oibleagáidí faoi Acht Aerloingseoireachta agus Aer Rianta continues to plan for and invest in the Aeriompar (Leasú) 1998, tá Aer Rianta ag leanúint leis an infrastructure needed to meet anticipated traffic growth pleanáil agus infheistíocht atá gá le, chun an méadú sa at its three Irish airports. trácht atáthar ag súil le ag a thrí aerfoirt Éireannacha, a shásamh. On a broader time frame and based on current projections, passenger traffic through Dublin Airport is likely to exceed Ar chlár-ama níos leithne agus de réir meastachán an lae 20 million within the next six years and may reach over 30 inniu, tá súil go mbeidh trácht trí Aerfort Átha Cliath níos million by 2020. With this in view, Aer Rianta and a team of mó ná 20 milliún laistigh de sé bliana agus seans ann go international consultants have engaged in a detailed sárófar 30 milliún faoi 2020. Agus an dearcadh seo ar an master-planning process to determine the optimum scéal, tá Aer Rianta agus foireann de chomhairleoirí facilities and the capital expenditure requirements to meet idirnáisiúnta páirteach i mionphróiseas maidir le this projected expansion. This programme, scheduled for príomhphleananna chun socrú a dhéanamh ar na háiseanna completion shortly, has examined specific proposals for is fearr agus an caiteachas caipitiúil is gá chun freastal ar terminal, pier, cargo and runway facilities. It has also an leathnú seo. Tá tairiscintí faoi leith i gcomhair fóntas assessed the best internal transportation and terminus críochfoirt, piara, lasta agus rúidbhealaigh iniúchta ag an options for integration with the planned rail link from the clár seo, atá le críochnú go gairid. Tá na roghanna is fearr city centre. maidir le hiompar inmheánach agus ceann cúrsa don naisc treanach atá beartaithe ón chathair iniúchta aige freisin. The additional passengers will generate significantly increased aircraft movements at Dublin Airport. To best Beidh a thuilleadh gluaiseachtaí aerárthaigh ag Aerfort Átha cater for this traffic, Aer Rianta and its advisers have Cliath de bharr na bpaisinéirí sa bhreis. Chun freastal ar concluded that the construction of a proposed new parallel an dóigh is fearr ar an trácht seo, tá sé socraithe ag runway to the north of the existing main runway, 10/28, Aer Rianta agus a chomhairleoirí go mbeidh gá le will be required within the next five to six years. rúidbhealach comhtreomhar nua atá beartaithe ó thuaidh ón phríomhrúidbhealach 10/28, laistigh de cúig nó sé de bhlianta. Major transport infrastructure projects of this kind De ghnáth, tá próiseas pleanála fada ag dul le scéimeanna normally involve a protracted planning process. To set the móra iompair bonneagair den tsaghas seo. process in motion, Aer Rianta hosted a public exhibition Dá bhrí sin agus chun an próiseas a thosnú, d’eagraigh last year in tandem with the framing of an Environmental Aer Rianta anuraidh taispeántas poiblí in éineacht le Impact Statement (EIS) and has launched a comprehensive ceapadh Ráitis Tionchair Chomhshaoil (EIS), agus tá clár advisory programme with neighbouring communities and comhairleach cuimsitheach tosnaithe acu le pobail their representatives in North County Dublin. The company comharsan agus a n-ionadaithe i dtuaisceart Co. Átha plans to submit a planning application for a new runway Cliath. Tá sé ar intinn ag an cuideachta iarratas pleanála le during 2003. hagaidh rúidbhealaigh nua a chur isteach i 2003. At Cork Airport, detailed plans for a new passenger terminal Cuireadh críoch le mionphleananna i gcomhair críochfoirt were finalised in the first months of 2003. This followed a paisinéirí nua ag Aerfort Chorcaí ins na chéad míonna de tendering process, which encountered some unavoidable 2003. Tharla seo tar éis mionphróisis tairisceana; bhí roinnt delays due to the scale and complexity of the contract moill dosheachanta ag baint leis an bpróiseas de bharr involved. Work on the facility and its support infrastructure méide agus castachta an chonartha i gceist. Déanfar tosnú will begin shortly. The new terminal is scheduled to open in le gairid ar an fóntas agus an bonneagar a ghabhann leis. early 2005 and will provide a major boost to the economy Tá sé beartaithe go n-osclófar an críochfort nua go luath i of the city and surrounding counties. 2005, agus tabharfaidh seo spreagadh mór do eacnamaíocht na cathrach agus na gcontaetha márguaird. Aviation Regulation In December 2001, Aer Rianta received leave to apply to Rialú Eitlíochta the High Court for judicial review of the Determination I Mí na Nollag 2001 fuair Aer Rianta cead dul go dtí an made by the Commission for Aviation Regulation, Ardchúirt le haghaidh athbhreithnithe dlíthiúil ar an in respect of the maximum level of airport charges that Chinneadh a bhí déanta ag an Coimisiún um Rialú Eitlíochta may be levied by the company at Dublin, Shannon and maidir leis an t-uasleibhéal de tháille aerfort gur féidir Cork airports. leis an chuideachta a ghearradh ag Aerfoirt Átha Cliath, na Sionainne agus Chorcaí. 9 In April 2003, the High Court delivered its judgement on the substantive issue underlying this review. This centres on In Aibreán 2003 d’fhógair an Ardchúirt a breith ar an cheist the company’s statutory role vis-à-vis that of the Regulator ábhartha faoin athbhreithniú seo. Baineann seo le páirt in determining the scale and nature of capital development reachtúil na cuideachta i gcomparáid le páirt an rialóra at the airports and the extent to which that expenditure can maidir le cinneadh ar an méid agus an cineál forbartha be recovered by means of airport charges. The company is caipitiúil atá ceadaithe ag na haerfoirt agus an méid den carefully considering the judgement. caiteachas sin gur féidir a fháil thar nais trí tháillí aerfort. Tá an bhreith á iniúchadh go géar ag an cuideachta. Special Olympics Na hOilimpeacha Speisialta Aer Rianta is making special preparations to greet the Tá ullmhúcháin speisialta á dhéanamh ag Aer Rianta chun athletes, coaches and families scheduled to attend the fáilte a chur roimh lúthchleasaithe, traenálaithe agus clanna Special Olympics in Ireland in June 2003. The Group a bhéas ag freastal ar na hOilimpeacha Speisialta in Éirinn i wishes the games every success and will ensure that the Meitheamh 2003. Guíonn an Grúpa gach rath ar na cluichí arrival at and departure from our airports of these agus déanfaidh sé deimhin de go mbeidh teacht agus treasured visitors will prove a pleasant and memorable imeacht na gcuairteoirí ionúin seo ina taithí suntasach. experience. Aer Rianta was delighted to present a Bhí an-áthas ar Aer Rianta síntúis bunúsach airgeadais a 10 significant financial contribution to the Special Olympics bhronnadh ar Choiste na nOilimpeach Speisialta i 2002, Committee in 2002, while hundreds of the company’s staff agus cuideoidh na céadta de fhoireann na cuideachta ar an will lend their practical support to the event by serving as ócáid i Meitheamh. Tá earraí go bhfuil baint acu leis na volunteers in June. A Special Olympics shop, the first in the cluichí á ndíol i siopa na nOilimpeach Speisialta, an chéad country, commenced selling games-related merchandise on sa tír, ar an sráid siopadóireachta ag Aerfort Átha Cliath ó the Shopping Street at Dublin Airport in April. Mí an Aibreáin i leith. Corporate Governance Modh Rialaithe Corparáideach The company continues to be committed to maintaining the Tá sé de chúram ag an cuideachta i gcónaí na caighdeáin highest standards of corporate governance. It makes every modh rialaithe corparáideach is airde a chleachtú. effort to deal with its customers, suppliers, staff, partners Déanann sé gach iarracht le déileáil lena chustaiméirí, and local communities in an open and fair manner and a sholáthraithe, a fhoireann, a pháirtnéirí agus le phobail respects the cultures and traditions of the countries in áitiúla i slí atá oscailte agus cothrom, agus tugann sé aird which it operates. Further details as to the application of ar chultúir agus traidisiúin na dtíortha ina bhfeidhmíonn sé. corporate governance principles are contained in the report Tá a thuilleadh sonraí maidir le prionsabail modh rialaithe of the Board of Directors. corparáideach le fáil i dtuarascáil an Bhoird Stiúrthóirí. Proposed Final Dividend Díbhinn Chríochnaitheach Molta On 30 April 2003, subsequent to the approval by the Ar 30 Aibreán 2003, tar eís glactha na ráiteas airgeadais ag directors of the financial statements, the directors na stiúrthóirí, do mhol na stiúrthóirí díbhinn recommended the payment of a final dividend of chríochnaitheach de €0.04938c in aghaidh na gnáthscaire, €0.04938c per ordinary share to be approved by the ach é a bheith ceadaithe ag na scairshealbhóirí ag cruinniú shareholders at the annual general meeting of the bliantúil ginearálta na cuideachta. ‘Sé an turadh a bhéas ar company. This will result in a total final dividend payment seo ná go mbeidh díbhinn chríochnaitheach de €7.245 of €7.245 million reducing profit and loss account reserves milliún san iomlán, laghdú €7.245 milliún ar chúlchiste carried forward at 31 December 2002 by €7.245 million. sochair agus dochair tugtha ar aghaidh ag 31 Nollaig 2002. Acknowledgements Buíochas I would like to thank the Minister for Transport, Ba mhaith liom buíochas a ghabháil leis an Aire Iompair, Séamus Brennan, T.D., and his predecessor, Senator Séamus Ó Braonáin, TD, agus a réamhtheachtaí, an Mary O’Rourke, for their professional support during the Seanadóir, Máire Uí Ruairc, as a dtacaíocht gairmiúil i rith year. The advice and assistance of the Secretary General na bliana. Bhí meas mór againn ar an chomhairle agus an of the Department of Transport, Julie O’Neill, and her chabhair a fuarathas ó Ardrúnaí na Roinne Iompair, predecessor Brendan Tuohy, were much appreciated. Julie O’ Neill agus ó Brendan Touhy, Ardrúnaí na Roinne The continuing support of Assistant Secretary, John Fiontar Poiblí. Ba fhíorluachmhar arís an tacaíocht Lumsden, and the staff of the Department of Transport, leanúnach a fuarathas ón Rúnaí Cúnta, John Lumsden, again proved invaluable. We would also like to express agus ó fhoireann na Roinne Iompair. Ba mhaith linn freisin our thanks to Tom Considine, Secretary General of ár mbuíochas a ghabháil le Tom Considine, hArdrúnaí na the Department of Finance, and his staff for their Roinne Airgeadais, agus lena fhoireann as ucht a continuing support. dtacaíochta leanúnaigh. I would like to thank my fellow Board members for their Ba mhaith liom buíochas a ghabáil le chomhbhaill an personal support and for their contribution to the continued Bhoird as ucht a dtacaíochta dom go pearsanta agus a success of the Aer Rianta Group. I would like to offer bhfuil déanta acu ar mhaithe le rathúlacht leanúnach special thanks to outgoing directors, Dermot O’Leary and Ghrúpa Aer Rianta. Ba mhaith liom buíochas faoi leith Tadhg O’Donoghue, who left the Board at the end of the a ghabháil le stiúrthóirí, Dermot O’Leary agus Tadhg year having completed their terms in office. My sincere O’Donoghue, a d’eirigh as oifig ag deireadh na bliana ar appreciation goes to Chief Executive John Burke, his chríochnú a dtéarmaí. Gabhaim mo fhíorbhuíochas leis an management team and all the staff across the Group, bPríomhfheidhmeannach, John Burke, a fhoireann for their commitment and hard work throughout what bainisteoireachta agus foireann an Ghrúpa go léir as ucht a proved a difficult year in many different respects. Their ndíograise agus a ndianoibre i gcúrsaí deacra. Déanfaidh a unremitting professionalism and expertise will ensure that ndúthracht agus a n-oilteacht, atá gan stad, deimhin de go the country’s three principal airports and Aer Rianta’s leanfaidh trí príomhaerfoirt na tíre agus gníomhaíochta Aer overseas interests will continue to develop to their true Rianta thar lear ag forbairt chomh fada is a féidir leo ar 11 potential, to the ultimate benefit of the Irish economy and deireadh thiar do thoradh eacnamaíochta na hÉireann agus its travelling public. an phobail taistil. Noel Hanlon Nollaig Ó hAnluain Chairman Cathaoirleach 30 April 2003 30 Aibreán 2003 John Burke, Chief Executive Accelerating change continued to be a key feature of the Airport Development and Funding Chief Executive’s Review aviation industry in 2002, affecting both airports and A crucial issue facing the company is that of ensuring the airlines. In a broader context, continuing change was also a infrastructural capacity of the airports continues to be key feature of the Irish and international economy. developed, in a timely way, to cater for expected growth in Aer Rianta adapted effectively to these changes at both passenger and cargo numbers and to meet the country’s an operational and a strategic level. At the same time, economic needs. Securing the necessary funding to the company engaged actively with the Government and discharge this statutory responsibility effectively presents other stakeholders in relation to the significant policy a major challenge for Aer Rianta. initiatives affecting Aer Rianta, specifically the question of giving greater autonomy to Cork and Shannon airports and The funding issue is integrally linked to the level of charges 13 the question of a second, independently operated, terminal which the company is permitted to set for airport at Dublin Airport. Important also during the year were the operations. Aer Rianta believes that the present level of ongoing arrangements for the provision of additional fast airport charges permitted by the Regulator, and the way in turnaround facilities at Dublin Airport on a temporary basis which that level is determined, does not allow sufficient initially and subsquently on a permanent basis. investment to cater for the forecast growth in the number of passengers and cargo that will use the airports. As the Performance Group’s current and future streams of non-aviation Group profit after tax and exceptional items amounted to revenues have been taken fully into account by the €36.2 million compared to €11.6 million in 2001. Regulator when setting his maximum airport charges, However, last year’s result had an exceptional charge of this income does not constitute an additional untapped €23.4 million for restructuring costs and a voluntary source of capital for investment in development of the redundancy scheme. €96 million was invested in Group airports. The company sought and was granted a judicial infrastructure during the year. review of the Regulator’s determination on airport charges. This profit after tax was achieved through cost containment The low level of charges at Dublin Airport has been despite increases in business volume and significant independently established. As reported last year, Professor increased security, interest and insurance costs. Rigas Doganis independently verified to the Department of the Taoiseach that airport charges are among the lowest Once again, practically all profits were generated by airport in Europe compared with similar-sized airports. The retailing, commercial activities and overseas businesses, Assessment Panel established by the Minister for Transport underlying the Group’s success in these areas, but also to examine proposals for an independently operated reflecting the continued low level of return from regulated terminal at Dublin Airport has concluded that the level of airport operations. charges at Dublin Airport is low when compared with other European airports. Indeed, the Panel reports that any new terminal may not be Strategy and Change financially viable on the basis of the existing low level of Aer Rianta continues to pursue its strategic goal to be charges and suggests that “increased, but realistic charges” a premier Irish international airport owner and operator, would not affect the operational attractiveness of a new meeting the needs and expectations of customers, facility for airlines. using resources effectively, fully realising the capabilities and potential of staff and optimising long- The Group’s year-end level of net debt is €376 million. term shareholder value. 14 Airport Planning Transformation and change within the company continues Plans for the future development of Cork and Shannon apace. In cooperation with staff, new technologies and airports have been completed. A new terminal has been more streamlined processes have been introduced, while a constructed and is fully operational at Shannon. Following a voluntary early retirement programme saw the departure of comprehensive process, plans for a new terminal at Cork 215 staff during 2002. were drawn up. Tenders for the construction of the new terminal are now in the final stages of evaluation. Cork will As part of our ongoing efforts to meet the sometimes have a new terminal by 2005. differing needs of our various customers; - airlines, service providers and the travelling public, Aer Rianta has been A major master-planning process for Dublin Airport has working to develop effective customer service agreements, been undertaken also. The results of this process will be an which will enhance the experience of all those using our important input into the future development of the Airport. airports. Also during the year a Passenger Services Council The public consultation process on the new proposed was established for Dublin Airport. parallel runway at Dublin Airport began in November 2002. It is a significant challenge to maintain quality customer The provision of additional infrastructure needs to be service standards in the context of continuously increasing provided in a timely manner to cater smoothly over time for passenger numbers and a seriously constrained revenue the anticipated growth in passenger numbers and cargo generating capacity, because of the current low level of traffic. Delays in making necessary investments will cause charges which are allowed to the company. difficulties in the form of congestion and poor service to customers. Overseas Aer Rianta’s investments in Birmingham, Düsseldorf and Second only in importance perhaps, to the question of how Hamburg airports performed well, given the global major infrastructural developments at the Airport are downturn in the aviation industry. Aer Rianta International’s funded, is the issue of appropriate surface access transport retailing operation was particularly strong in the CIS, and the urgent need to reduce the current dependence on Ukraine and Middle East. During the year, a new nine-year an already pressurised road system. Aer Rianta continues duty-free concession was secured at Seeb International to work closely with the bodies charged with developing Airport in Muscat, Oman. In Canada, a new duty-free road and rail access to the Airport. The putting in place of a concession began operating at Halifax Airport in rail link in particular, which is linked to the city centre and March 2002. to the wider national transport network, is very important for the future development of Dublin Airport. Great Southern Hotels The final outcome of the Minister’s consideration of the Great Southern Hotels (GSH) experienced a second question of a second terminal at Dublin Airport, operated successive year of difficult trading conditions. independently of Aer Rianta, and the issue of greater In line with national trends, hotel room capacity increased autonomy for Cork and Shannon airports will clearly be during the year, but growth in demand was slow. very significant for the company. It will of course be equally The company continues to invest significantly in its important in determining how, and by whom, airport prime hotel properties. infrastructure is provided in the future. Aer Rianta is participating fully in the consultative process initiated by the A €15 million restoration and refurbishment programme Minister and will provide advice based on its expertise and was completed in the Killarney Great Southern Hotel in mid experience. As continuing uncertainty for the company is 2002 while the €12 million extension to the hotel at Dublin most undesirable, it is welcome that the Minister has Airport opened in May 2002. Eyre Square has been undertaken to deal with these issues as quickly as possible. refurbished at a cost of €8 million and has reopened as Galway City’s premier hotel. In November 2002 the Board I would like to pay tribute to management and staff of GSH decided to close the Torc Hotel in Killarney, as throughout the Group for their hard work and commitment surplus to its business requirements, and to offer the site during the year. They have delivered a strong performance and premises for sale. in sometimes trying and uncertain circumstances. I wish to thank our Chairman, Noel Hanlon, and the members of the Outlook Board for their unstinting dedication, support and advice. Aer Rianta continues to evolve to meet the rapidly expanding I am confident that, jointly, we can meet any challenges that demand for air travel, embracing business, leisure and tourist come our way in the future. traffic. Traffic growth has been phenomenal at the three airports in the past decade and is forecast to grow strongly over the next decades. The company is engaged in, or has completed significant master-planning projects at Dublin, Shannon and Cork to ensure that our airports will be well placed to meet future traffic demand. 15 John Burke Our overseas subsidiary, Aer Rianta International, Chief Executive is contributing significantly to the Group’s profitability. Great Southern Hotels continues to invest in its hotels. 30 April 2003 Airport Management The Dublin–UK market accounted for over half of the Review of the Year Airport’s total traffic in 2002. Passenger numbers in this sector grew by 6% to 7.9 million. The second largest In 2002, Dublin, Shannon and Cork airports worked market – Europe – grew by 9% and surpassed the 5.6 successfully to attract new airlines, deliver more million mark. The sector now comprises over one-third of destinations and increase capacity on many routes. Dublin’s business. Growth was strong in both the The three airports catered for a total passenger throughput scheduled and charter segments. of 19.3 million passengers, up 4.3% on 2001. Over the period 1995–2002, traffic has grown from 10.6 million to Transatlantic traffic was down 15% due to the adverse 19.3 million – an increase of over 80%. Over 80 airlines affects of 11 September 2001 and the slow-down in 17 serve over 130 routes to the UK, Europe and North America economic activity. The numbers travelling on domestic from the three airports. flights out of Dublin remained at approximately 650,000. On a typical busy day, Dublin Airport handles over 650 flights carrying up to 70,000 passengers – not far short of Physical Development The main terminal extension project was completed an All Ireland Day crowd at Croke Park! No other airport in and formally opened by An Taoiseach, Bertie Ahern T.D., the UK or Europe has this level of traffic and connections in June 2002. for a similar population size. To facilitate the growing requirements of fast-turnaround Reflecting the industry’s heightened concern with security, airline operations at Dublin, planning approval was obtained Aer Rianta ensures that its airports comply with from Fingal County Council for a temporary Pier D facility international security regulations and has put in place to be in place for Summer 2003 and a permanent Pier D 100% hold baggage screening since 1 January 2003. to be in operation by the following summer. An airline and This means that all baggage that goes into the holds of a residents’ organisation appealed both projects to An aircraft at Dublin, Shannon and Cork airports is checked Bord Pleanála. However, the permanent Pier D has now by modern screening technology. been approved. Dublin Airport Total Passenger Numbers 20 Traffic Performance 19.3 18.5 It was another record-breaking year for Dublin Airport, 18 17.9 where passenger numbers climbed to 15.1 million in 16.5 2002. This represents a 5% increase on 2001. Airlines 16 operating out of the airport served 74 scheduled and 14.8 46 charter routes. 14 Air Canada launched summer services to Toronto; Aer 12 Lingus added seven services – some new for the Airport; and Ryanair started flights to Aberdeen. 10 1998 1999 2000 2001 2002 Passenger traffic through Dublin Airport is forecast to London continued to be Shannon’s biggest market and double to over 30 million by 2020. Aer Rianta, with the recorded modest growth. assistance of international consultants, is planning for the optimum facilities and the capital expenditure requirements Transatlantic results were better than expected – despite the to meet this projected expansion. This programme, loss of Delta Air Lines’ service to New York JFK and Aer scheduled for completion shortly, has examined specific Lingus services to Newark and Baltimore-Washington. options for terminal, pier, cargo and runway facilities. Traffic fell by 9% compared with 2001, but the surviving US It has also assessed the best internal transportation and services delivered excellent load factors. The new Air 18 terminus options for integration with the planned rail link Canada service to Toronto made a significant contribution from the city centre. to the sector. The arrivals road was widened to substantially increase Domestic traffic was down 26%, due mainly to the the space available for taxis and buses. A new coach park withdrawal of the Aer Lingus commuter service. Aer Arann was completed to support the increasing volume of bus Express started a twice-daily service to Dublin during the and coach services. A major extension to Air Traffic year, but lack of support resulted in its termination in Control (ATC) facilities was completed for the Irish December 2002. Aviation Authority. Transit traffic fell by 15% – a direct result of reduced transatlantic services and the decision by Royal Jordanian Shannon Airport to fly direct from New York to Amman. Traffic Performance Physical Development The total number of passengers through Shannon in 2002 The company opened its new shared services centre at was 2.35 million – a drop of 2% on 2001. This was ahead Shannon during the year. The purpose-built centre of expectations, particularly given the reduction of capacity consolidates all the in-house financial services for Dublin, on transatlantic services. Shannon and Cork airports and has led to major cost benefits and efficiencies. European traffic showed an increase of 36% on 2001, with both scheduled and charter operations delivering growth. Aer Rianta completed a new maintenance hangar for one of The new SkyNet service to Amsterdam and Ryanair flights its bigger cargo customers at Shannon – United Parcels to Paris both contributed to an upbeat performance in the Service (UPS). European sector. In an effort to improve customer service and streamline the Traffic on UK routes fell by 2%, due to the loss of Belfast information operation at Shannon, a new information desk and London Gatwick services, as well as reduced frequency and centre opened in the arrivals hall. Investment in 100% on the Manchester route. hold baggage screening was completed during the year. Airside pavement repairs were also undertaken and new floodlighting was installed on the east and south-east aprons. Cork Airport Physical Development Cork Airport will be transformed with a brand new terminal Traffic Performance and other facilities. During 2002 there was intense activity Cork Airport’s growth momentum produced another traffic to put in place all the arrangements for the commencement record. Passenger figures for the Airport grew to almost 1.9 of the construction of the terminal. Work on the facility and million – an increase of 5.6% over 2001. its support infrastructure will begin shortly and the terminal will be ready for 2005. The strongest growth was on UK routes – passenger numbers travelling to London Stansted were up 29% on Cork’s €8 million apron extension and new taxiway project 2001. UK provincial traffic grew by 10%, spurred on by the was completed midway through 2002. This has provided launch of new services by Aer Arann to Southampton, more aircraft parking space and ensures that adequate Edinburgh, Birmingham and Bristol. Other new services capacity is available. were introduced by Loganair to Glasgow, BMI to Leeds Bradford and bmiBaby to East Midlands. Improvements were carried out to the long-term overflow car park to provide greater comfort for users. Cork extended its range of European scheduled and charter In the terminal, additional space was provided to allow for services, which proved a boon for business travellers and peak-time passenger flow. The catering area has been holidaymakers. A new scheduled Malaga service was refurbished and offers a new range of services to launched by Aer Lingus. New European holiday destinations customers. included Croatia, Cyprus and Morocco. As a result, European passenger numbers grew by 16%. Domestic Projects in the pipeline include the construction of a new numbers fell by 11%, largely due to reduced frequency by control tower for the Irish Aviation Authority on the western Aer Lingus on the Dublin route. Its replacement by Aer side of the airfield. A proposal to re-zone a 40-acre site on Arann, using smaller aircraft, resulted in reduced capacity. the Kinsale Road was submitted for inclusion in the five- year revision of the County Cork Development Plan. The level of enquiries and new contacts remains strong at 19 Cork, with convincing indications of new services to come. A new airline, Jet Magic, commenced services to Belfast and Brussels and Czech Airlines commenced a new service to Prague, in April 2003. Environment Community Relations Aer Rianta seeks to ensure that operations at its airports In 2002, many public information meetings were held with are carried out to high environmental standards. representatives from the local communities around our airports. This is an important part of our commitment to Our environmental mission is: ‘To develop and operate a keeping everybody well informed about proposed sustainable business in compliance with regulatory developments. It also allows our neighbours a forum for requirements, best management practices, and with discussion on any elements of our operations which may 20 sensitivity to local community and public concerns.’ cause them inconvenience or concern. Aer Rianta’s key environmental objectives are to: To secure the long-term development of Dublin Airport, • Maintain high and stable levels of economic it has long been recognised that a proposed parallel growth and employment runway will be required on the northern side of the airfield. • Achieve social progress that recognises Aer Rianta hosted a three-week public consultation on the everyone’s needs environmental impact assessment, which was attended by • Provide effective protection of the environment many representatives from local communities. This consultation is part of an on-going process to ensure that For Aer Rianta, sustainability means balancing these three any development at Dublin Airport should cause the least objectives. Like many other organisations, we cannot possible environmental impact on local communities. achieve sustainability in isolation from the economy and society we serve. The year under review saw the introduction of some changes to the operating procedures for aircraft arriving Each of our three airports is developing environmental into, and departing from, Dublin Airport. These changes management plans and systems specific to their needs. were identified using the new ‘Noise & Flight Track Monitoring the environmental impacts of our airport Monitoring System’. As a result, the number of aircraft systems on air and water quality continues. In addition, now over-flying local communities has been significantly the minimisation and management of waste is the subject reduced. This is an on-going process where continuing of increasing emphasis. Processes are now in place which benefits will be identified and introduced over the greatly increase the amount of material being recycled. coming years. Again, this is an on-going process and will remain one of our prime objectives. At Shannon and Cork, consultations with local residents continued. Meetings were held on a regular basis with the local Chambers of Commerce, Cork Airport Consultative Committee, Shannon Airport Marketing Consultative Committee, local authorities and representative bodies. Safety Passengers now have a voice to articulate their views on service standards and how they can be improved. A voluntary service level agreement has been put in place Aer Rianta assesses and manages risks using best safety between Aer Rianta and the Airline Operators Committee. management systems. In order to maintain systems and This agreement comprises inter-alia minimum standards in practices at the highest levels, the company works closely respect of check-in, baggage delivery, security search with all regulatory bodies, including the Health & Safety queuing, trolley availability and baggage equipment Authority, the Irish Aviation Authority (IAA) and the local serviceability. This service level agreement is another authorities. Performance is reviewed on a regular basis by a important step in further improving service standards at board sub-committee. The safety statement required under Dublin Airport. ‘Health & Safety at Work’ legislation has been re-issued and reiterates our commitment to safe work practices At Shannon, there is a renewed focus on delivering throughout the Group. The IAA, which regulates aviation improved customer service and efficiency. In order to standards at Dublin, Shannon and Cork, has confirmed our ensure a quality service to customers, Aer Rianta has taken licences to operate for 2003. In addition, it has over the responsibility for aircraft stand planning and independently audited one of our airports in the year under allocation, baggage carousels and trolley collection. review and has confirmed Aer Rianta’s compliance with This has led to a significant improvement in services. licensing requirements. Cork Airport was voted the ‘Best Irish Airport’ for 2002 by Customer Service the Air Transport Users Committee of the Chambers of Commerce in Ireland. Feedback indicated that customer service was a major factor in this decision to recognise Aer Rianta has established a ‘Passenger Services Council’ Cork Airport. Cork is implementing a range of at Dublin Airport to provide passengers with a forum on improvements in the existing terminal - mainly aimed at service standards. The prime objective of the Council is to creating more space in congested areas. Numerous promote continuous improvement in passenger service meetings were held with the Airport Consultative Committee levels at Dublin. It provides an effective forum for during the year. 21 discussing all matters relating to services at the Airport; how these impact on passengers and on the people accompanying or meeting them, as well as other visitors. Airport Retailing Airport retailing is a core business for Aer Rianta’s Irish Shannon Duty Free and Travel Value shops enjoyed strong airports. In addition to meeting the needs and expectations sales in 2002, despite the reduced number of American of customers, the sector contributes significantly to Group visitors. Book sales were particularly strong. The perfume profits. In 2002, total retail sales activity at the three and cosmetic store will be completely refurbished early in airports, including that of concessionaires, was ahead 2003. Landside, the Londis store and other retail outlets in of 2001. the main terminal traded well and further units are planned. Sales of food and, in particular meat products, recovered The company continues to follow a twin-track strategy for strongly in the second half of the year, following the its airport retailing business. It offers duty and tax-free complete removal of restrictions on the importation of such shopping for non-EU travellers, while for those travelling products for US-bound travellers. 23 within Ireland and the EU it has developed ‘Travel Value’ outlets. These offer top quality national and international Trading was strong at the Travel Value store at Cork Airport, brands at special value for all passengers. In parallel, the helped by very good book and music sales that came on strategy seeks to provide passengers with the widest stream during the year. Perfume and cosmetics sales possible choice of branded retail and food/beverage outlets. performed well, as did the souvenir product ranges. Plans are in place to add new jewellery and watch offers during In line with the desire to use its resources effectively, work 2003. Detailed planning work has begun on the retail and continued during the year to exploit the full potential of the catering facilities for Cork’s new terminal. new SAP retail information system, with new modules being brought on-line in 2002. Airport Catering Meeting the food and beverage requirements of passengers The Aer Rianta Irish airport retail outlets were among the represents a major business at Aer Rianta airports and is first shops in the country to introduce people to the euro operated through concessions at Dublin and Cork, and on New Year’s Day 2002 and over the following weeks the directly by Aer Rianta at Shannon. Concessionaire food and changeover to the new currency was successfully managed. beverage units traded strongly with overall sales running ahead of 2001. The ‘Street’ is Dublin Airport’s premier shopping thoroughfare. It had a highly successful first full year At Dublin Airport, construction started on the next phase of trading in 2002. The ‘Street’ offers a total of 24 different of development on the mezzanine floor. The first of the new shops, including the Bailey Bar and the first airport- catering facilities, Bewley’s Express, opened early in 2003 based Butler’s Chocolate Café. Among the new outlets to to be followed by a new Food Court, which includes the open during the year were the Guinness store – the first first airport based ‘Nude’ gourmet fast food outlet. of its kind at an airport – and SOAR, a new jewellery, The development will be completed with the opening of a watch and fashion accessory shop, selling leading new full-service brasserie restaurant and a suite of fully- international brands. fitted meeting rooms in early summer 2003. Reflecting the company’s desire to be the ‘Best in its Class’, At Cork Airport, food and beverage facilities have been Aer Rianta’s pursuit of excellence led to the prestigious fully refurbished and a new Café Cuisine coffee outlet ‘Frontier’ Highly Commended award for the Butler’s opened in 2002. Chocolate Café development on Dublin Airport’s ‘Street’. The award was made at the travel retail industry’s trade awards in France to both Aer Rianta and the Irish Chocolate Company. Aer Rianta International Aer Rianta, through its wholly owned subsidiary, Aer Rianta Overseas Retailing International cpt (ARI) is a major global player in airport ARI-associated companies in Moscow and St. Petersburg in ownership and duty-free retailing. Headquartered in Russia, together with Kiev in Ukraine, had another successful Shannon, it has regional offices in Bahrain and Canada. year. Each location enjoyed an increase in turnover, which Its business covers 20 operations in 14 different countries. enhanced the financial performance of the region. ARI consolidated its position in 2002 when it recorded a profit after tax of €13.2 million. In the Middle East, ARI, through its associate company Aer Rianta International (Middle East) W.L.L. (ARIME), secured a Overseas Airports new nine-year duty-free concession at Seeb International Birmingham International Airport handled 8 million 25 Airport in Muscat, Oman. The operation opened for business passengers in 2002, an increase of 2.8% over 2001. on 1 February 2003. ARIME produced record results during The Airport is well positioned to achieve further growth. the period, with the new departures shop at Bahrain Duty 2003 will see the opening of the rail link between the Free contributing to this success. The improved performance Airport and the main line train station and of the Multi was achieved despite the downturn in aviation business Model Interchange. Surface access to the Airport will resulting from 11 September 2001, which continued to have be improved significantly as a consequence. a negative impact on passenger numbers in the Middle East. The recent hostilities in Iraq also resulted in a decline in retail Düsseldorf International Airport handled 14.7 million sales. However, there are encouraging signs of recovery. passengers in the year under review, down 4.3% on 2001, reflecting more difficult trading conditions. Growth in Our subsidiary in Canada, Aer Rianta International (North passenger numbers is expected to return in 2003, reflecting America) Inc., experienced the immediate effects of the the improved market conditions of the latter part of 2002, events of 11 September 2001. Passenger numbers fell though any international instability could limit the expected significantly in the initial months and recovered gradually growth. The people mover link between the Airport and the throughout 2002. The financial performance of the main railway station was opened in July 2002 and Pier C, subsidiary has improved in line with the return to normal the final part of the terminal development project “Airport passenger levels. The new duty-free concession at Halifax 2000 plus”, is due to open in May 2003. Airport opened in March 2002 and has made an encouraging start. Aer Rianta International intends to Hamburg Airport handled 8.9 million passengers in 2002, pursue additional Canadian and North American down 5.7% on 2001. This position is expected to be opportunities that fit our investment profile. reversed in 2003. Planning and design work for the new Terminal “T2” has commenced and it is expected to open Outlook in 2005 increasing capacity to a projected 20 million The travel retail industry continues to experience passengers per annum. challenging times. Aer Rianta, however, sees opportunities for investment within existing operations and the market at large. Our international subsidiary will continue to invest in attractive proposals that will add value to the existing profitable retail businesses. Great Southern Hotels has been one of Ireland’s premier Great Southern Hotels continued its investment programme Great Southern Hotels hotel groups since 1845. During that time, it has with a €15 million restoration and refurbishment established a unique tradition of service to its guests. programme in the Killarney Great Southern Hotel. It can The company owns eight hotels and has a 25% now justifiably claim to be Killarney’s leading conference, shareholding in the four-star City Hotel Derry, which it incentive and leisure hotel. The three-star Torc Great manages. Derry’s premier hotel opened in August 2002. Southern Hotel in Killarney was closed following a review of the group’s Kerry portfolio. Plans for the further A second successive year of difficult trading conditions for development of the Great Southern Hotel at Parknasilla are 27 Irish tourism generally, and for the hotel sector in well advanced. particular, saw Great Southern Hotels’ operating profit before exceptional items, interest and taxation fall by 45% The €12 million extension to the hotel at Dublin Airport in 2002 to €1.8 million. Group profit after tax increased to was opened in May 2002. The Eyre Square property in €3.93 million, reflecting the net impact of exceptional items Galway reopened in April 2003 after an €8 million after tax. refurbishment and restoration project. Hotel room capacity increased during the year, but growth It is anticipated that 2003 will be another difficult year in demand failed to materialise. As a result, occupancy for the hotel sector. The focus will be on controlling costs, levels fell. In the absence of growth in key overseas maintaining market share and maximising the return markets, operators offered discounted rates to attract on investment. domestic business. This, in turn, affected revenue and yield. Yield was affected, also, by increased operating costs, especially in payroll and insurance. The closure of the Killarney and Galway hotels for refurbishment for a combined total of seven months during the year had a negative impact on sales and operating costs. Human Resources In pursuing the company’s strategic objectives, Aer Rianta A significant number of staff also receive valuable support continues to encourage staff to fully realise their in obtaining professional qualifications through our ‘Career capabilities and potential. It supports this through a range Support Scheme’. An equality review commenced in the of initiatives, policies and practices and a commitment to last quarter of 2002. The review is supported and work in partnership with employees and their implemented by the Equality Authority on behalf of the representatives. Our human resource strategy supports Department of Justice, Equality & Law Reform. It will these aims through a framework of company-wide policies provide a comprehensive review of current policies, and practices aimed at assisting staff in developing their practices, procedures, and perceptions of equality and skills and protecting them in carrying out their daily work. diversity in Aer Rianta and an agreed action plan to address any areas requiring attention. 29 In a challenging year for the company, substantial progress was made on a number of fronts. Certain key businesses Employee Assistance Programme and functions were restructured, which facilitated major The company operates an employee assistance programme changes across the company. Part of this change process across the Group through which staff can avail of a was a voluntary severance programme which formally confidential advisory, counselling and referral service. opened in January 2002. Over 200 staff took up the offer to The Employee Assistance unit took many initiatives exit the company. throughout the year aimed at improving staff well-being, including health screening and a programme to help In its dedication to ‘use resources effectively’ and to ‘meet smokers give up the habit. the needs and expectations of customers’, Aer Rianta made a major strategic investment in Oracle technology systems Payroll in 2002. A new Oracle HR system went ‘live’ in September Group payroll costs for 2002 amounted to €142.6 million, which marks the beginning of a new technological era for an increase of 5.8% on 2001. This included employer Human Resources. The company remains strongly contributions of €18.4 million for social welfare and committed to working in partnership with its staff and to superannuation. The final phases of PPF 2000 were paid the continuing development of appropriate structures and throughout the year and are included in these figures. processes for this purpose. Employment Our approach to ‘Performance Management’ was reviewed. In 2002, the Aer Rianta Group employed 3,431 staff (full- A new process was developed in consultation with unions time equivalent) compared with 3,438 in 2001. Over 80 and their representatives. A series of training programmes additional security staff were recruited in 2002 as a result was initiated for managers, with the objective of reinforcing of changes in worldwide aviation security. The figure also the process in the context of the continuing restructuring of includes 117 staff from Kievrianta, which is now a wholly the company. owned subsidiary of Aer Rianta. However, significant savings in cost were achieved through the departure of Training & Development over 200 staff as part of the voluntary severance and Investment in staff learning and development continues to restructuring that has occured across the company. be a priority for Aer Rianta, and helps in gaining vital competitive advantage. The main training priorities in 2002 The breakdown of the average (FTE) staff numbers for were: information technology; airside safety; customer 2002 was: service and performance management. In addition, individual career coaching was used to maximise staff Airports 2,416 potential and as a result contributed significantly to Hotels 708 improved performance during 2002. International 307 Total 3,431 Ancillary Activities Property The performance of the two property joint ventures continued to record good progress in 2002, contributing profits and increased value to the Group. In line with Aer Rianta’s core value of meeting the needs and expectations of customers and optimising long-term shareholder value, 31 the company’s 50/50 joint venture company with Dunloe Ewart plc. is developing the Horizon Business Park at Dublin Airport. Omnistone, in which Aer Rianta has a 25% shareholding, is continuing to develop the Cork Airport Business Park. Shannon Aviation Fuels Shannon Aviation Fuels (SAF), a division of Aer Rianta operates at Shannon Airport. For over 20 years SAF has been involved in the storage, handling and sale of aviation fuel. Shannon College of Hotel Management The Shannon College of Hotel Management is a recognised college of the National University of Ireland (NUI). It offers an NUI Degree in Hotel Management and qualifying students are eligible for free third-level fees and higher education grants. Financial Review Group Financial Highlights Total turnover from airport charges increased by just over 2% equivalent to about one half of the level of passenger 2002 2001 growth. Overall airport charges per passenger fell some 2% €'m €'m to €5.55, a real reduction of over 6.4%. At Dublin, airport charges per passenger reduced by some 10.7% Passengers (millions) 19.3 18.5 in real terms; total turnover from airport charges also fell Turnover 420.9 438.3 despite over 5% passenger growth. This reflected the Group profit before exceptionals 75.9 67.2 impact of the regulatory cap introduced in 2001 by the Net exceptional items (after tax) 5.3 (19.2) Commission for Aviation Regulation. Group profit for the year 36.2 11.6 33 Balance Sheet Cost of goods for resale decreased by 16% while other Gross assets 1,045.2 927.3 operating costs increased by 5.4% over 2001 levels. Shareholders' funds 403.3 372.2 The Group’s share of operating profits from associates and Cash balances 96.9 45.3 joint ventures increased by almost 70% to €42.6 million. Net borrowings 375.8 320.6 Group profit before exceptional items, interest and tax, was €75.9 million, an increase of 13% from €67.2 million the previous year. Group Results Exceptional profits of €5.3 million (after tax) arose in 2002 Passenger numbers at the three airports increased on sales of land. The 2001 results reflected a net by 4.3% last year. Dublin Airport was one of the three exceptional charge (after tax) of €19.2 million (including highest growth airports in Europe and one of only seven €23.4 million for a major restructuring programme). of the top twenty European airports to report annualised growth in the year ending October 2002. Given that the Group net interest charge (excluding associates/joint period in question came in the immediate aftermath of the ventures) increased by €3.5 million to €21.4 million September 11th attacks in the US, this represented a very arising from funding of the Group’s capital investment satisfactory achievement. programme at the three airports. The Group’s share of net interest cost of associates and joint ventures rose to Group turnover in 2002 was €420.9 million, 4% lower than €11.5 million. in the previous year reflecting a fall in turnover at Shannon Airport, in particular in fuel sales. Turnover increased in all As a result of the profit growth, the taxation charge of the other Group’s main business entities despite less increased to €14.2 million, from €6.6 million in 2001. buoyant trading conditions. Taking into account the different corporation tax rates applicable across the Group and associates, both Airport charges continue to be very low by comparison with domestically and internationally, the effective tax rate in international airports and comprise a disproportionately low 2002 was 28% (2001: 36%). percentage of turnover: equivalent to about one quarter of Group turnover. Group profit for the year after tax and exceptional items was €36.2 million, up from €11.6 million in 2001. Group Turnover Group EBITDA €500 €100 €450 €438 €90 €425 €421 €85 €400 €80 €78 €372 €72 €73 €350 €70 €70 €338 €300 €60 €250 €50 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 Subsidiary and Associated Undertakings Cash outflows in respect of the Group’s fundamental Subsidiary and associated undertakings continued to be an restructuring programme amounted to €18.7 million in important contributor to Group profitability. These 2002 (2001: €nil). Group cash investment in fixed asset principally comprise Aer Rianta International (international infrastructure was some €95 million (2001: €115 million). airport retailing and airport investments), the Great Other capital items, including financial investments, Southern Hotels Group and property ventures. acquisitions and disposals gave rise to cash inflows of €13.3 million (2001: cash outflows of €12.2 million). Aer Rianta International reported profit after tax and exceptional items of €13.2 million, almost unchanged on Group net debt increased to €376 million, up €55 million 34 2001. Great Southern Hotels reported profit after tax and on 2001 levels. Cash balances were €96.9 million at year- exceptional items in 2002 of €3.9 million – an increase of end (2001: €45.3 million). over 20% over the previous year. The Group’s share of profits from property ventures increased by nearly 75% in During the course of the year the Group drew down a 2002 to €3.1 million despite a slower property market. long-term loan of €125 million from the European Investment Bank. Balance Sheet Shareholders’ funds increased by 8% to €403.3 million Gearing (measured by expressing net debt as a percentage (2001: €372.2 million). of the aggregate of net debt and ordinary shareholders’ funds) increased to 48% by year-end (2001: 46%). Group Gross assets passed the €1 billion mark, increasing by interest cover was 3.3 times (2001: 4.0 times) based on 13% to €1,045 million. Fixed assets have increased from Group EBITDA divided by the Group net interest charge. €395 million to €892 million over the past five years, an Net debt rose to 5.4 times Group EBITDA (2001: 4.4 times). increase of 125%. Details of debt maturity, un-drawn facilities and interest rate management are set out below. Cashflow & Funding Net cash inflow from operating activities was €63.3 million The Group has a credit rating from Standard & Poor’s (2001: €82.9 million). (S&P) of A+/Negative/A-1 on a stand-alone credit quality basis. The senior unsecured €250 million bond issued by Aer Rianta Finance plc, and guaranteed by Aer Rianta cpt, has a rating of A+. Group Net Debt Cash Investment in Tangible Fixed Assets €500 €150 €132 €400 €125 €376 €115 €321 €100 €95 €94 €300 €84 €266 €75 €208 €200 €50 €132 €100 €25 €0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 S&P altered their ratings outlook from positive to negative Foreign Exchange Risk Management in October 2002 reflecting the expected financial profile The Group’s Irish businesses are predominately euro following the Commission for Aviation Regulation’s first denominated. The Group does not carry foreign currency Determination on airport charges. exposures other than in the normal course of business. Where they do arise, the Group’s policy is to minimise Treasury currency transaction risk, by seeking to hedge foreign The main risks arising from the Group’s financial exchange transaction exposures that might impact on instruments are liquidity risk, interest rate risk, foreign reported profit. The Group operates a US dollar based currency risk and credit risk. The Board reviews and agrees aviation fuel business at Shannon. This fuel business is policies for managing each of these risks and they are conducted so as to minimise exposure to movements in the 35 summarised below. euro/US dollar exchange rate and fuel price movements, for example by denominating both fuel sales and purchases in On occasion, the Group utilises derivatives to eliminate or US dollars. Currency exposures are disclosed in note 25. reduce foreign exchange and interest rate risks arising from the Group’s operations and its sources of finance. The Group has a number of overseas subsidiary and associated undertakings, as set out in note 11 of the Liquidity Risk financial statements. The principal foreign exchange The Group’s policy is to ensure continuity of funding with a exposures arising from these investments are in sterling, substantial portion of borrowings maturing in more than US dollars and Canadian dollars. Exchange differences on five years. Some 80% of the Group’s borrowings at the end translation of overseas investments are dealt with in the of 2002 were due to mature in more than five years. Statement of Total Recognised Gains and Losses. The Un-drawn committed facilities were €79 million at the Group’s policy is to hedge identified transaction exposures year-end. arising from these undertakings (principally dividends and management charges denominated in foreign currencies). Interest Rate Risk The Group has a substantial portion of its debt Credit Risk denominated as long-term fixed interest debt, thus The Group’s credit risk consists principally of cash minimising exposure to interest rate fluctuations. This deposits, short-term investments and trade debtors. Cash includes a €250 million Eurobond (2011) and a long-term surpluses are only deposited with banks and institutions €125 million loan from the European Investment Bank. with an appropriate credit standing. At the end of 2002, 85% of the Group’s borrowings were at fixed rates at an average rate of 5.9%. ROUTE NETWORK DUBLIN AIRPORT SHANNON AIRPORT CORK AIRPORT 36 Aer Rianta cpt Annual Report and Accounts 2002 Directors’ Report & Financial Statements for the year ended 31 December 2002 Contents Page Report of the directors 38 Statement of directors’ responsibilities 41 Independent auditors’ report 42 Statement of accounting policies 43 Group profit and loss account 45 Statement of total recognised gains and losses 46 Movement on reserves 46 Reconciliation of movement in shareholders’ funds 46 Group balance sheet 47 Company balance sheet 48 37 Group cash flow statement 49 Notes on and forming part of the financial statements 50 Five year summaries 70 General business and aeronautical information 74 Aer Rianta cpt Annual Report and Accounts 2002 Report of the directors The directors have pleasure in submitting Corporate Governance December 2002 and Mr. Oliver Cussen was their annual report together with the appointed in his place. The directors continue to be committed to audited financial statements for the year maintaining the highest standards of ended 31 December 2002. A scheduled meeting of the Board is corporate governance. Set out below are usually held each month, except August. Principal Activities details of how the relevant principles of Additional meetings are convened as good governance contained in "The required. The Board is responsible for the The Group’s principal activities are the Combined Code: Principles of Good proper management of the Group and development, operation and management Governance and Code of Best Practice" are takes all significant strategic decisions and of the three principal Irish airports – applied in Aer Rianta cpt. The directors retains full and effective control while Dublin, Shannon and Cork, Irish and believe that the application of these allowing operating management sufficient international airport retail management and principles also assist the Group to comply flexibility to run the business efficiently international airport investment. The Group with the ethical and other considerations and effectively within a centralised is also involved in the hotel industry in implicit in the Code of Practice for the reporting framework. Ireland through its subsidiary, Great Governance of State Bodies published by Southern Hotels Group. the Department of Finance. The Board has reserved certain items for its review including, inter alia, the approval Review of the Business and Future The Board and Committees of the annual financial statements, Developments The Group is headed by an effective Board, budgets, corporate plan, significant Detailed commentaries on performance for which currently comprises six non- acquisitions and disposals, investments in the year ended 31 December 2002, executive directors, including three joint ventures, significant contracts, including information on recent events and employee directors, and one executive property transactions, major investments, likely future developments, are contained director (Chief Executive). The roles of the significant capital expenditure and senior in the Chairman’s statement and the Chief Chairman and Chief Executive are separate management appointments. The Group has Executive’s review. and all of the non-executive directors are a comprehensive process for reporting 38 independent of management. The Minister management information to the Board. Results for the Year for Transport, with the consent of the The Board is provided with monthly The financial results of the Group for the Minister for Finance, appoints the information, which includes key year show a profit after taxation and Chairman and other non-executive performance and risk indicators for all exceptional items for the financial year directors to the Board. The employee aspects of the business. amounting to €36.2 million compared with directors are appointed for a term of up to €11.6 million for 2001. Exceptional items All directors have access to the advice and four years following a nomination and comprise profit on disposal of lands of services of the Company Secretary who is election process under the Worker €6.1 million (before attributable tax charge responsible to the Board for ensuring that Participation (State Enterprises) Acts, 1977 of €0.8 million). The profits in 2001 Board procedures are followed and that and 1988. Other non-executive directors reflected an exceptional cost of €28.5 applicable rules and regulations are are appointed for terms not exceeding five million (before attributable tax credit of complied with. The Company’s years. The Chief Executive is an ex officio €5.1 million) for a major restructuring professional advisers are available for member of the Board appointed by the programme and an exceptional gain of consultation by the Board as required. directors of the Company, and is the sole €5.3 million (before attributable tax charge Individual directors may take independent executive director. On the expiration of of €1.1 million) on the disposal of a professional advice, if necessary, at the their terms, Mr. Tadhg O’Donoghue and financial asset. Group’s expense. On appointment, all Mr. Dermot O’Leary retired from the Board directors are provided with briefing on 12 November 2002. Mr. Brian Hampson documents on the Group and its retired as Company Secretary on 31 operations as well as relevant training. 2002 2001 € million € million Group profit before exceptional items 75.9 67.2 Exceptional items (net) 6.1 (23.2) Group profit before interest 82.0 44.0 Interest (net) – Group, associates and joint ventures (31.6) (25.8) Group profit before taxation 50.4 18.2 Taxation – Group, associates and joint ventures (14.2) (6.6) Profit for the financial year 36.2 11.6 Details of the results for the year are set out in the Group profit and loss account and related notes. Aer Rianta cpt Annual Report and Accounts 2002 Report of the directors (continued) Ms. Freda Hayes is the Senior Independent directors and Aer Rianta cpt or any of its The organisation structure of the Group Non-Executive Director. subsidiaries during the year. under the day-to-day direction of the Chief Executive is clear. Defined lines of Board Committees Directors’ Remuneration responsibility and delegation of authority The Board has activated an effective Fees for directors are determined by the have been established. committee structure to assist in the Minister for Transport, with the consent of Management are responsible for the discharge of its responsibilities. Details in the Minister for Finance. The remuneration identification and evaluation of significant relation to the various committees that of the Chief Executive is determined in risks applicable to their areas of business operated during 2002 and their current accordance with the arrangements issued together with design and operation of board membership is set out below. by the Department of Transport for suitable internal controls. As part of this determining the remuneration of Group Audit Committee identification process management have Chief Executives of Commercial State Mr. Liam Meade, Chairman, Ms. Freda identified the significant risks, which could Bodies under its aegis and is subject to the Hayes and Mr. Pat Fitzgerald. This materially adversely affect the Group’s approval of the Remuneration Committee committee normally meets at least four business financial condition or results of and the Minister for Transport. times a year and operates under formal operations. These risks are assessed on a A proportion of the Chief Executive’s terms of reference. The committee may continual basis and management report to remuneration is performance-related and, review any matters relating to the financial the Board significant changes in the in this way, is linked to Group objectives affairs and internal control arrangements business and external environment, which and strategies. of the Group. affect the significant risks identified. Audit Committee and Auditors Health & Safety Committee The directors have established a number of Mr. Noel Hanlon, Chairman, Mr. John The Board maintains an objective and key procedures designed to provide an Burke, Mr. Pat Fitzgerald, Mr. Peter Dunne professional relationship with the Group’s effective system of internal control, which and Mr. Cecil Brett. This committee auditors. The Audit Committee, a formally includes an annual review of the monitors and reviews matters in relation to constituted committee of the Board, is effectiveness of the system of internal 39 aviation safety, and health and safety at comprised of non-executive directors. Its control. The key procedures, which are work at each of Dublin, Shannon and Cork written terms of reference deal clearly with supported by detailed controls and airports. its authority and its duties. The Audit processes, are as follows: Committee is responsible to the Board for Remuneration Committee the review of internal financial controls and • active Board involvement in assessing Mr. Noel Hanlon, Chairman, Ms. Freda the scope and performance of the Group key business risks faced by the Group Hayes and Mr. Liam Meade. This Internal Audit function. It also reviews the and determining the appropriate course committee determines and approves scope and results of the external audit and of action for managing these risks; remuneration and bonus arrangements for the nature and extent of services provided • the putting in place of a formalised risk the senior management group. Details of by the external auditors. The Chairman of reporting system; directors’ fees and emoluments are set out the Audit Committee reports to the Board in note 6 to the financial statements in on all significant issues considered by the • a schedule of items reserved to the accordance with the requirements of the committee and the minutes of its meetings Board for review as previously outlined; Companies Acts, 1963 to 2001. are circulated to all directors. • a clearly defined organisation structure Security Committee Accountability and Audit with appropriate segregation of duties Mr. Noel Hanlon, Chairman and Mr. John and delegation of responsibility and The directors acknowledge their overall Burke. This committee monitors and authority within which the Group’s responsibility for establishing and reviews matters in relation to security at activities can be planned, executed, maintaining the system of internal control Dublin, Shannon and Cork airports. controlled and monitored to achieve the throughout the Group. strategic objectives which the Board has Directors’ and Secretary’s Interests The system of internal control comprises adopted for the Group; The directors and secretary had no those ongoing processes for identifying, beneficial interest in the shares of the evaluating and managing the significant • a formal code of business ethics; Company or in those of its subsidiaries at risks faced by the Group in pursuing its • a comprehensive system of management any time during the year or the preceding business objectives. Such a system is and financial reporting, accounting, financial year. designed to manage rather than eliminate treasury management and project risk of failure and can therefore only The Board is satisfied that its non- appraisal; provide reasonable and not absolute executive directors are free from any assurance that the Group will achieve • clearly defined limits and procedures for business or other relationship that could those objectives or that the Group will not financial expenditure including materially interfere with the exercise of suffer material misstatement or loss. procurement and capital expenditure; their independent judgement. There was no significant contract between any of the Aer Rianta cpt Annual Report and Accounts 2002 Report of the Directors (continued) • annual budgets and long-term plans for Compliance Statement action to ensure compliance with the Act, the Group and business units; including the adoption of safety The Group has been in compliance with statements. • representation at Board level in the the Code of Best Practice provisions of the Group’s principal associates and joint Combined Code relevant to it throughout Subsidiary, Associated and Joint Venture ventures; the financial year under review and up to Undertakings the date of this report other than as • monitoring of performance against follows: The information required by Section 158 of budgets for the Group and its principal the Companies Act, 1963 in relation to associates and joint ventures and • as directors are either appointed by the subsidiary, associated and joint venture reporting thereon to the Board on a Minister for Transport with the consent undertakings is set out in note 11. monthly basis; of the Minister for Finance or by the Board, the provisions in relation to a Prompt Payments Act • an Internal Audit department which Nomination Committee and director Aer Rianta cpt’s policy is to comply with reviews key systems and controls; re-election do not apply; the requirements of the Prompt Payment • an Audit Committee, which reviews audit • full disclosure is made in these financial of Accounts Act, 1997 as amended by the plans and deals with significant control statements relating to directors’ European Communities (Late Payment in issues raised by the internal or external emoluments and pension contributions Commercial Transactions) Regulation 2002 auditors and meets periodically with the in accordance with the requirements of (SI 388). internal auditors and the external the Irish Companies Acts, 1963 to 2001 The Company’s standard terms of credit, auditors; and the Department of Transport. unless otherwise specified in contractual However, these disclosures do not arrangements, are in compliance with the • full and unrestricted access to the Audit extend to those contained in the Act. The Company has instituted Committee for internal and external Combined Code. procedures to implement and monitor 40 audit; The Group also complied with the ethical compliance with the requirements and • a Group Aviation Safety and Standards these procedures provide reasonable but and other provisions implicit in the Code of function which monitors and reports on not absolute assurance against material Practice for the Governance of State aviation safety and security standards non-compliance. As in previous years, Bodies issued by the Department of and operational procedures at the substantially all Company payments by Finance. airports; number and value were made within the Going Concern appropriate credit period as required. • a Health & Safety Committee that Interest of €20,000 was paid in the year. monitors and reviews matters in relation The directors have a reasonable to aviation safety, and health and safety expectation that the Group has adequate Electoral Act, 1997 at work at the airports; resources to continue in operation for the The Group did not make any political foreseeable future. For this reason, they donations during the year. • a Security Committee that monitors and continue to adopt the going concern basis reviews matters in relation to security at in preparing the financial statements. Post Balance Sheet Events the airports. Accounting Records There have been no significant post The directors confirm that the Group’s balance sheet events which require ongoing process for identifying, evaluating The directors believe that they have adjustment to the financial statements or and managing the significant risks facing it complied with the requirements of section the inclusion of a note thereto. is in accordance with the guidance in 202 of the Companies Act, 1990 with Internal Control: Guidance for Directors on regard to books of account by employing Auditors the Combined Code (Turnbull). In accounting personnel with appropriate In accordance with Section 160(2) of the particular, the Board has reviewed the expertise and by providing adequate Companies Act, 1963, the auditors, KPMG, process for identifying and evaluating the resources to the financial function. The Chartered Accountants, will continue in significant risks affecting the business and books of account of the Company are office. the policies and procedures by which these maintained at the Company’s premises at risks are managed. Associated companies Dublin, Shannon and Cork airports. On behalf of the Board are considered as part of the Group’s on- Noel Hanlon Chairman Health and Safety going risk review process. Liam Meade Director The wellbeing of the Group’s employees is 26 March 2003 Communication with Shareholder safeguarded through the strict adherence Through regular contact with relevant to health and safety standards. The Safety, Government Departments, the Board and Health and Welfare at Work Act, 1989 management maintain an ongoing dialogue imposes certain requirements on with the Company’s shareholder on employers and all relevant companies strategic issues. within the Group have taken the necessary Aer Rianta cpt Annual Report and Accounts 2002 Statement of directors’ responsibilities Company law requires the directors to prepare financial statements for each financial year which, in accordance with applicable Irish law and accounting standards, give a true and fair view of the state of affairs of the Company and of the Group and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently • make judgements and estimates that are reasonable and prudent • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Company and of 41 the Group and to enable them to ensure that the financial statements comply with the Companies Acts, 1963 to 2001 and all Regulations to be construed as one with those Acts. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. On behalf of the Board Noel Hanlon Chairman Liam Meade Director 26 March 2003 Aer Rianta cpt Annual Report and Accounts 2002 Independent auditors’ report to the members of Aer Rianta cpt We have audited the financial statements Company to hold an extraordinary explanations which we considered on pages 43 to 69. general meeting on the grounds that the necessary in order to provide us with net assets of the Company, as shown in sufficient evidence to give reasonable This report is made solely to the the financial statements, are less than assurance that the financial statements are Company's members, as a body, in half of its share capital. free from material misstatement, whether accordance with section 193 of the caused by fraud or other irregularity or Companies Act, 1990. Our audit work has We also report to you if, in our opinion, error. In forming our opinion we also been undertaken so that we might state to information specified by law regarding evaluated the overall adequacy of the the Company's members those matters we directors’ remuneration and transactions presentation of information in the financial are required to state to them in an with the Group is not disclosed. statements. auditor's report and for no other purpose. To the fullest extent permitted by law, we We review, at the request of the directors, Opinion do not accept or assume responsibility to whether the voluntary statement on page 40 reflects the Group’s compliance with the In our opinion, the financial statements anyone other than the Company and the give a true and fair view of the state of Company's members, as a body, for our seven provisions of the Combined Code that the Irish Stock Exchange specifies for review affairs of the Group and the Company as at audit work, for this report, or for the 31 December 2002 and of the profit of the opinions we have formed. by auditors, and we report if it does not. We are not required to consider whether Group for the year then ended and have Respective responsibilities of directors the Board’s statements on internal controls been properly prepared in accordance with and auditors cover all risks and controls, or form an the Companies Acts, 1963 to 2001 and all opinion on the effectiveness of the Group’s Regulations to be construed as one with The directors are responsible for preparing those Acts. corporate governance procedures or its risk the annual report. As described on page and control procedures. We have obtained all the information and 41, this includes responsibility for preparing the financial statements in We read the other information contained in explanations we considered necessary for 42 accordance with applicable Irish law and the purposes of our audit. In our opinion, the annual report, including the corporate accounting standards. Our responsibilities, governance statement and consider proper books of account have been kept by as independent auditors, are established whether it is consistent with the audited the Company. The balance sheet of the in Ireland by statute, the Auditing financial statements. We consider the Company is in agreement with the books Practices Board and by our profession’s implications for our report if we become of account. ethical guidance. aware of any apparent misstatements or In our opinion, the information given in the material inconsistencies with the financial report of the directors on pages 38 to 40 is We report to you our opinion as to statements. consistent with the financial statements. whether the financial statements give a true and fair view and are properly Basis of audit opinion prepared in accordance with the The net assets of the Company, as stated Companies Acts. As also required by the We conducted our audit in accordance in the balance sheet on page 48, are more Acts, we state whether we have obtained with Auditing Standards issued by the than half of the amount of its called up all the information and explanations we Auditing Practices Board. An audit includes share capital and, in our opinion, on that require for our audit, whether the examination, on a test basis, of evidence basis there did not exist at 31 December Company’s balance sheet is in agreement relevant to the amounts and disclosures in 2002 a financial situation which, under with the books of account and report to the financial statements. It also includes an section 40(1) of the Companies you our opinion as to whether assessment of the significant estimates (Amendment) Act, 1983, would require the and judgements made by the directors in convening of an extraordinary general • the Company has kept proper books of the preparation of the financial statements, meeting of the Company. account; and of whether the accounting policies are appropriate to the Group’s circumstances, KPMG • the report of the directors is consistent consistently applied and adequately Chartered Accountants with the financial statements; disclosed. Registered Auditors Dublin • at the balance sheet date a financial We planned and performed our audit so as 26 March 2003 situation existed that may require the to obtain all the information and Aer Rianta cpt Annual Report and Accounts 2002 Statement of accounting policies for the year ended 31 December 2002 The following accounting policies have Company and the Group balance sheet on Southern Hotels Group, are stated either at been applied consistently, in dealing with the same basis, with income from such a valuation on an open market existing use items which are considered material in assets being recognised on a receivable basis at 31 December 1994 or at cost if relation to the Group’s financial basis in the profit and loss account. acquired subsequently. That Group is statements. availing of the transitional provision of Turnover Financial Reporting Standard 15 (FRS 15) Basis of Preparation Turnover represents the value of goods "Tangible Fixed Assets" in continuing to The financial statements are prepared in and services, net of discounts, supplied to carry such assets at their previous accordance with generally accepted external customers excluding intra-Group revalued amounts, which is not being accounting principles under the historical sales and value added tax. updated for subsequent changes in value cost convention, as modified by the except as adjusted for subsequent revaluation of certain assets, and comply Foreign Currency additions, disposals and impairment, with financial reporting standards of the Transactions arising in foreign currencies if any. Accounting Standards Board, as are translated into euro at the rates of The directors of Great Southern Hotels promulgated by The Institute of Chartered exchange ruling at the date of the Limited review the estimates of useful lives Accountants in Ireland. transactions or at contracted rates. and residual values of its hotel buildings Monetary assets and liabilities Basis of Consolidation annually, and have determined that any denominated in foreign currencies are charge to depreciation would be The Group financial statements consolidate translated into euro at the contracted rates immaterial. On an annual basis, that Group the financial statements of the Company or at year-end rates of exchange. The also estimates the recoverable amount of and its subsidiary undertakings resulting profits or losses are dealt with in its hotel buildings; to the extent that the (subsidiaries) made up to 31 December the profit for the year. recoverable amount is less than the 2002. Where applicable, the Group’s net carrying amount, an impairment loss is Joint venture undertakings (joint ventures) investment in overseas subsidiaries, recognised in the financial statements. 43 are those undertakings over which the associates and joint ventures is translated Capitalisation of Interest Group exercises control jointly with one or at the rate ruling at the balance sheet date. more other parties. Associated The results of overseas subsidiaries, Interest incurred up to the time that undertakings (associates) are those associates and joint ventures are, where separately identifiable major capital undertakings in which the Group has a applicable, included at the average rate of projects are ready for service is capitalised participating interest in the equity capital exchange. The resulting translation as part of the cost of the assets. and over which it is able to exercise differences are taken to reserves. Intangible Assets significant influence. Tangible Fixed Assets and Depreciation Purchased goodwill arising on an The Group includes its share of associates’ Depreciation is calculated to write off the acquisition (representing the excess of the and joint ventures’ profits and losses and cost of tangible fixed assets other than fair value of the consideration given over separately discloses its share of its joint land and freehold hotel properties on a the fair value of the separate net assets ventures’ turnover in the consolidated straight line basis over the estimated acquired) is capitalised and is amortised profit and loss account. For associates, the useful lives as follows: on a straight line basis over its estimated Group includes its share of net assets in useful life, the period during which the consolidated balance sheet. For joint Terminal complexes 10 - 50 years benefits are expected to accrue. ventures, the Group includes its share of Airfields 10 - 50 years gross assets and gross liabilities in the Purchased goodwill is being amortised consolidated balance sheet. Plant and equipment 2 - 20 years over a twenty year period or where shorter the period of the concession agreement The results of subsidiaries, associates and Other property 10 - 50 years entered into in the acquired entity. joint ventures acquired or disposed of in (excluding hotel buildings) the year are included in the consolidated Where events or circumstances are Where a tangible fixed asset is to be profit and loss account from the date of present which indicate that the carrying withdrawn from use, the depreciation acquisition or up to the date of disposal. amount of goodwill may not be charge for that asset is accelerated to recoverable, the Group estimates the Financial Assets reflect the asset’s remaining useful life recoverable amount based on the present based on the period between the date of Investments in subsidiaries, joint ventures value of future cashflows expected to the decision to withdraw the asset and the and associates are shown in the Company result from the use of the asset and its forecast date when withdrawal will take balance sheet as financial fixed assets and eventual disposition. Where this amount is place. are valued at cost less provisions for less than the carrying amount of the asset, impairment in value. Other financial fixed The freehold hotel properties of the the Group will recognise an impairment loss. assets are also carried in both the Company’s subsidiary undertaking, Great Aer Rianta cpt Annual Report and Accounts 2002 Statement of accounting policies (continued) for the year ended 31 December 2002 Intangible Assets (continued) expected to reverse. As permitted by FRS Derivative Financial Instruments 19, deferred tax is not recognised on the The principal objective of using derivative Other intangible assets are recorded at gains arising from the revaluation of hotel financial instruments, including forward acquisition cost, being fair values at date properties. No deferred tax has been exchange contracts, forward rate of acquisition, less the amounts amortised recognised on the unremitted earnings of agreements and interest rate swaps, is to to the profit and loss account. These overseas subsidiaries and associates as no hedge the Group’s interest rate and intangible assets are amortised over their tax is expected to be payable on them. currency exposures. Where these economic lives, being the terms of various Deferred tax assets are recognised to the derivative financial instruments hedge an concessions which currently range from extent that they are regarded as asset, liability or interest cost reflected in three to eight years. recoverable based on the likelihood of the financial statements, the cost of the Stocks there being suitable taxable profits from hedging instrument is included in the which the future reversal of the underlying carrying amount together with the income Stocks are stated at the lower of cost and timing differences can be deducted. and expenses relating to the asset and net realisable value. Cost is based on invoice price on either an average basis or Pension and Other Post-Retirement liability. Where the derivative is a hedge of on a first in first out basis depending on Obligations future cash flow, the gains and losses on the stock category. Net realisable value is the hedging instruments are not The Group provides pensions to recognised until the hedged future calculated as estimated selling price less substantially all employees through transaction occurs. estimated selling costs. contributions to a number of separately Taxation administered schemes, the majority of Cash and Liquid Resources which are defined or target benefit pension Within the Group cash flow statement, Corporation tax in respect of the Company schemes. cash is defined as cash, deposits repayable and its subsidiary undertakings is provided at current rates and is calculated on the The expected cost of providing pensions on demand and overdrafts. Other deposits 44 basis of their results for the year adjusted and other retirement benefits to employees with maturity or notice periods of over one for taxation purposes and taking account is charged to the profit and loss account working day, but less than one year, are of the availability of Shannon Relief, where as incurred over the period of employment classified as liquid resources. appropriate. The taxation charge in the of pensionable employees. Debt and Finance Costs profit and loss account includes taxation on the Group’s share of profits of Operating Leases Debt is initially stated at the amount of the associated and joint venture undertakings. Expenditure on operating leases is charged net proceeds after deduction of to the profit and loss account on a basis finance/issue costs. Finance and issue Full provision without discounting is made costs are charged to the profit and loss representative of the benefit derived from for all timing differences, other than those account over the term of the debt at a the asset, normally on a straight-line basis arising from revaluation gains in the case constant rate on the carrying amount. over the lease period. of Great Southern Hotels Group, at the balance sheet date in accordance with Capital Grants Financial Reporting Standard 19 (FRS 19) "Deferred Tax". Provision is made at the tax Capital grants are treated as deferred rates that are expected to apply in the income and amortised over the expected periods in which the timing differences are lives of the related fixed assets. Aer Rianta cpt Annual Report and Accounts 2002 Group profit and loss account for the year ended 31 December 2002 2002 2001 Note €000 €000 Turnover: Group and share of joint ventures 427,036 441,980 Less: share of joint ventures’ turnover (6,162) (3,660) Group turnover - continuing operations 1 420,874 438,320 Operating costs Cost of goods for resale (114,952) (137,655) Payroll and related costs 2 (142,636) (134,855) Materials and services (93,482) (93,257) Depreciation and amortisation (36,530) (30,595) (387,600) (396,362) Group operating profit - continuing operations 33,274 41,958 Share of operating profits Joint venture undertakings 3,062 1,501 Associated undertakings 3 39,576 23,744 Group profit before exceptional items 75,912 67,203 Exceptional items – continuing operations Profit on disposal of fixed assets 4 6,056 - Profit on disposal of financial assets 4 - 5,272 Costs of fundamental restructuring 4 - (28,500) 45 Group profit before interest 81,968 43,975 Income from other financial assets 1,344 298 Interest receivable Group 1,880 3,721 Joint venture undertakings 49 - Associated undertakings 188 609 Interest payable Group 5 (23,296) (21,663) Joint venture undertakings 5 (746) (845) Associated undertakings 5 (10,987) (7,905) Group profit on ordinary activities before taxation 6 50,400 18,190 Taxation on profit on ordinary activities 7 (14,172) (6,627) Group profit on ordinary activities after taxation 36,228 11,563 Minority interest - equity 28 (5) 4 Group profit for the financial year 8 36,223 11,567 Group profit and loss account at beginning of year 172,602 161,073 Transfer from profit and loss account reserve arising from renominalisation of share capital 19 - (38) Profit and loss account at end of year 208,825 172,602 There is no material difference between results as reported and those prepared on a historical cost basis. On behalf of the Board Noel Hanlon Chairman Liam Meade Director 26 March 2003 Aer Rianta cpt Annual Report and Accounts 2002 Other consolidated financial statements for the year ended 31 December 2002 Statement of total recognised gains and losses 2002 2001 Note €000 €000 Profit for the financial year 36,223 11,567 Exchange differences on translation of overseas investments (arising on net assets) subsidiary undertakings (754) (116) associated undertakings (4,378) 588 Gain arising on acquisition of shares in associated undertaking - 2,277 Total recognised gains and losses for the year 31,091 14,316 Movement on reserves At 1 January 185,901 171,623 Retained profit for the financial year 20 36,223 11,567 Currency translation adjustments 20 (5,132) 472 Gain arising on acquisition of shares in associated undertaking - 2,277 Transfer from profit and loss account reserve arising from renominalisation of share capital 19 - (38) 46 At 31 December 20 216,992 185,901 Included in the financial statements of: Parent company 20 65,358 49,153 Subsidiary undertakings 20 93,305 87,912 Joint venture undertakings 20 2,239 465 Associated undertakings 20 56,090 48,371 At 31 December 20 216,992 185,901 Reconciliation of movement in shareholders’ funds At 1 January 372,238 357,922 Total recognised gains and losses for the year 31,091 14,316 At 31 December 403,329 372,238 Aer Rianta cpt Annual Report and Accounts 2002 Group balance sheet at 31 December 2002 2002 2001 Note €000 €000 Fixed assets Tangible assets 9 698,394 638,943 Intangible assets 10 7,883 8,448 706,277 647,391 Financial assets Investments in joint venture undertakings Share of gross assets 20,609 20,055 Share of gross liabilities (25,028) (26,248) Loans to joint venture undertakings 4,882 4,882 463 (1,311) Investment in associated undertakings 155,478 152,085 Other financial assets 30,076 30,225 Total financial assets 11 186,017 180,999 892,294 828,390 Current assets Stocks 12 18,922 20,217 Debtors 13 37,166 33,370 Cash at bank and in hand 96,855 45,328 47 152,943 98,915 Creditors: amounts falling due within one year 14 (135,453) (138,945) Net current assets/(liabilities) 17,490 (40,030) Total assets less current liabilities 909,784 788,360 Creditors: amounts falling due after more than one year 15 (463,444) (354,078) Capital grants 17 (30,437) (32,150) Provisions for liabilities and charges 18 (12,628) (29,994) Net assets 403,275 372,138 Capital and reserves Called up share capital 19 186,337 186,337 Profit and loss account 20 208,825 172,602 Other reserves 20 8,167 13,299 Shareholders' funds - equity 403,329 372,238 Minority interest - equity 28 (54) (100) 403,275 372,138 On behalf of the Board Noel Hanlon Chairman Liam Meade Director 26 March 2003 Aer Rianta cpt Annual Report and Accounts 2002 Company balance sheet at 31 December 2002 2002 2001 Note €000 €000 Fixed assets Tangible assets 9 577,308 535,774 Financial assets 11 131,849 132,432 709,157 668,206 Current assets Stocks 12 11,600 14,555 Debtors 13 65,679 42,587 Cash at bank and in hand 82,181 34,334 159,460 91,476 Creditors: amounts falling due within one year 14 (121,321) (120,664) Net current assets/(liabilities) 38,139 (29,188) Total assets less current assets/liabilities 747,296 639,018 Creditors: amounts falling due after more than one year 15 (456,232) (345,523) Capital grants 17 (29,331) (31,045) Provision for liabilities and charges 18 (10,038) (26,960) 48 Net assets 251,695 235,490 Capital and reserves Called up share capital 19 186,337 186,337 Profit and loss account 20 65,358 49,153 Shareholders’ funds - equity 251,695 235,490 On behalf of the Board Noel Hanlon Chairman Liam Meade Director 26 March 2003 Aer Rianta cpt Annual Report and Accounts 2002 Group cash flow statement for the year ended 31 December 2002 2002 2001 Note €000 €000 Cash inflow from operating activities 21 63,296 82,897 Payments in respect of exceptional restructuring programme 18 (18,697) - Dividends received from associated undertakings 3,571 5,268 Returns on investments and servicing of finance 22 (18,352) (5,212) Corporation tax paid (930) (10,406) 28,888 72,547 Capital expenditure and financial investment 22 (88,010) (122,271) Acquisitions and disposals 22 6,363 (4,500) Cash outflow before management of liquid resources and financing (52,759) (54,224) Management of liquid resources Net cash transferred to liquid resources 23 (48,697) (25,395) 49 Financing 22 107,556 94,756 Increase in cash in year 23 6,100 15,137 Aer Rianta cpt Annual Report and Accounts 2002 Notes on and forming part of the financial statements for the year ended 31 December 2002 1 Turnover - continuing operations Group 2002 2001 €000 €000 Activity Aeronautical revenue 107,165 104,709 Commercial activities 271,010 291,683 Hotels 42,699 41,928 Total turnover 420,874 438,320 Geographical Irish airports 331,492 353,076 Irish hotel activities 42,699 41,928 Overseas 46,683 43,316 Total turnover 420,874 438,320 A segmental analysis of results and net assets is not provided, as disclosure of such information would, in the directors’ opinion, be seriously prejudicial to the interest of the Group. 2 Payroll and related costs Wages and salaries 124,019 118,261 50 Social welfare costs 12,165 12,293 Pension costs 6,186 4,352 Other staff costs 1,271 855 143,641 135,761 Staff costs capitalised into fixed assets (1,005) (906) Net staff costs 142,636 134,855 Employee figures (full time equivalents) for the Group 2002 2001 were as follows: Airports 2,416 2,511 Hotels 708 737 International activities 307 190 3,431 3,438 3 Share of operating profits of associated undertakings This relates to the Group’s share of profits before interest and taxation for the year in its associated undertakings as defined in the Statement of Accounting Policies. Management fees and other direct income from these undertakings are included in turnover of the Group. 4 Exceptional items Profit on disposal of fixed and financial assets: A profit of €6.056 million (net of attributable costs) arose on the disposal of land in the parent and a subsidiary company. The capital gains tax arising is €0.777 million. In 2001 a profit of €5.272 million (net of attributable costs) arose on the disposal of an option to acquire an additional shareholding in an associated undertaking. The capital gains tax arising was €1.054 million. Costs of fundamental restructuring: In 2001 a number of fundamental change programmes including a voluntary severance scheme were initiated and agreed across Aer Rianta to significantly change structures, work practices, systems and processes. The cost of the restructuring programme resulted in a charge of €28.5 million in 2001 (which had the effect of reducing the tax charge in 2001 by €5.1 million). This programme continues into 2003. The total amount paid to 31 December 2002 was €18.7 million. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 5 Interest payable Group 2002 2001 €000 €000 Group Interest payable on loans wholly repayable by instalments within five years 1,350 2,248 Interest payable on loans wholly repayable after five years 6,741 6,351 Interest on loan notes 15,375 13,395 Amortisation of issue costs 117 93 Other interest payable 20 34 23,603 22,121 Interest capitalised (307) (458) Total interest payable - Group 23,296 21,663 Joint venture undertakings Interest on loans repayable by instalments within five years 746 845 Associated undertakings Interest payable on loans repayable by instalments within five years 3,507 2,577 Interest payable on loans repayable by instalments after five years 9,261 7,478 Finance lease interest 5 - 51 Interest capitalised (1,786) (2,150) Total interest payable – associated undertakings 10,987 7,905 Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 6 Statutory and other information Group 2002 2001 €000 €000 Group profit on ordinary activities before tax is stated after charging/(crediting): Auditors' remuneration (including expenses): for audit services 329 285 for other services 499 584 828 869 Operating lease rentals: equipment 1,634 1,651 buildings 7,664 8,174 Depreciation: normal 35,469 30,572 accelerated 202 36 35,671 30,608 Amortisation of capital grants (1,713) (1,723) 52 Amortisation of intangible assets and goodwill 2,206 1,775 Directors' remuneration: fees 127 121 other emoluments (including pension contribution) 303 273 430 394 The remuneration package of the Group Chief Executive reflected in the amounts shown above as directors’ remuneration was as follows: Directors’ fee 13 13 Basic salary 234 217 Performance related remuneration 35 28 Pension contributions and taxable benefits 33 28 315 286 Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 7 Taxation on profit on ordinary activities Group 2002 2001 €000 €000 Current tax: Corporation tax - Ireland 51 325 Overseas tax of subsidiary undertakings 843 113 894 438 Capital gains tax – Ireland (note 4) 777 1,054 Tax attributable to Group 1,671 1,492 Share of Irish tax of joint venture 591 191 Share of Irish tax of associated undertakings 256 308 Share of overseas tax of associated undertakings 8,146 4,888 Overprovision in respect of prior periods (1,472) - Current tax charge 9,192 6,879 Deferred tax: Origination/reversal of timing differences attributable to Group (note 18) 1,331 (891) share of associated undertakings 3,649 639 53 Deferred tax charge/(credit) 4,980 (252) Taxation on profit on ordinary activities 14,172 6,627 Irish corporation tax has been reduced by the effect of Shannon Relief of €Nil (2001: €0.181 million). The Group’s Irish operations are subject to differing rates of corporation taxation, according to, inter alia, the nature of activities. During 2002 these rates varied from 10% to 25%. The standard rate of corporation taxation in the Republic of Ireland, which applies to certain of the Group’s income, is reducing from 16% in 2002 (2001: 20%) to 12.5% in 2003. No provision has been made for deferred tax on gains recognised on revaluing hotel properties to their market value in 1994, in accordance with Financial Reporting Standard 19 (FRS19) ‘Deferred Tax’. Deferred tax would only be payable if the hotels were sold at their book values. The total amount unprovided for is €3.5 million. It is not envisaged that any such tax will be payable in the foreseeable future. The current tax charge for the period is higher than the standard rate of tax in the Republic of Ireland. The differences are set out in the tax reconciliation below: Profit on ordinary activities 50,400 18,190 Profit on ordinary activities at standard corporation tax rate in Republic of Ireland of 16% (2001: 20%) 8,064 3,638 Effects of: Capital allowances for period in excess of depreciation (951) (1,523) Expenses (deductible)/not deductible for tax purposes in the current year (timing differences) (915) 2,386 Expenses not deductible for tax purposes (permanent differences) 783 932 Profits of foreign undertakings taxable at higher rates 3,622 1,735 Profits taxable at lower rates - (181) Irish profits taxable at higher rates 357 97 Other (296) (205) Overprovision in respect of prior periods (1,472) - Current tax charge for the year 9,192 6,879 Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 8 Profit for the financial year A separate company profit and loss account is not presented as provided for under the Companies (Amendment) Act 1986, Section 3(2). A profit of €16.2 million (2001: loss €5.1 million) has been dealt with in the financial statements of the Company. 9 Tangible fixed assets Group Terminal Lands & Plant & Hotel Other Assets in Total complexes airfields equipment buildings property the course of construction €000 €000 €000 €000 €000 €000 €000 Cost or valuation At 1 January 2002 Cost 270,111 149,386 172,682 29,050 134,908 60,016 816,153 Valuation - - - 41,647 - - 41,647 Total 270,111 149,386 172,682 70,697 134,908 60,016 857,800 Additions 100 117 7,181 16,734 31 71,642 95,805 Transfer to completed assets 10,858 20,540 4,713 9,920 15,758 (61,789) - Acquisition of subsidiary undertaking - - 529 - - - 529 54 Disposals - (164) (427) (508) - - (1,099) Translation - - (448) - - - (448) Write-offs (190) - (1,505) - (31) - (1,726) At 31 December 2002 Cost 280,879 169,879 182,725 55,196 150,666 69,869 909,214 Valuation - - - 41,647 - - 41,647 At 31 December 2002 280,879 169,879 182,725 96,843 150,666 69,869 950,861 Depreciation At 1 January 2002 44,264 38,934 90,060 - 45,599 - 218,857 Charge for the year 9,000 5,154 15,932 - 5,585 - 35,671 Disposals - - (268) - - - (268) Translation - - (269) - - - (269) Write-offs (190) - (1,309) - (25) - (1,524) At 31 December 2002 53,074 44,088 104,146 - 51,159 - 252,467 Net book value 2002 227,805 125,791 78,579 96,843 99,507 69,869 698,394 2001 225,847 110,452 82,622 70,697 89,309 60,016 638,943 Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 9 Tangible fixed assets (continued) Company Terminal Lands & Plant & Other Assets in Total complexes airfields equipment property the course of construction €000 €000 €000 €000 €000 €000 Cost At 1 January 2002 270,111 142,515 137,304 129,297 50,096 729,323 Additions 100 117 5,236 31 69,292 74,776 Transfer to completed assets 10,858 20,540 4,713 15,758 (51,869) - Disposals - (164) (362) - - (526) Write-offs (190) - (1,505) (31) - (1,726) At 31 December 2002 280,879 163,008 145,386 145,055 67,519 801,847 Depreciation At 1 January 2002 44,264 38,934 68,097 42,254 - 193,549 Charge for the year 9,000 5,154 13,032 5,533 - 32,719 Disposals - - (205) - - (205) Write-offs (190) - (1,309) (25) - (1,524) At 31 December 2002 53,074 44,088 79,615 47,762 - 224,539 55 Net book value 2002 227,805 118,920 65,771 97,293 67,519 577,308 2001 225,847 103,581 69,207 87,043 50,096 535,774 Lands and airfields (Group and Company) includes airport land at a cost of €19.6 million (2001: €19.8 million). Fixed asset additions (Group) include internal architectural and engineering costs of €1.0 million (2001: €0.9 million). Fixed asset additions (Company) include internal architectural and engineering costs of €0.9 million (2001: €0.9 million). Fixed assets (Group and Company) include cumulative interest capitalised of €2.6 million (2001: €2.3 million). Interest of €0.3 million (2001: €0.5 million) (Group and Company) was capitalised at an average rate of 5.6% per annum. Certain hotel buildings were revalued on an open market basis by Donal O’Buachalla & Co Limited, at 31 December 1994. The valuations were carried out in accordance with the Appraisal and Valuation Manuals published by the Society of Chartered Surveyors. The valuation has been retained under the transitional provisions of Financial Reporting Standard 15 (FRS15) "Tangible Fixed Assets". Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 10 Intangible assets Concession Goodwill 2002 2001 rights Total Total Group €’000 €’000 €’000 €’000 Cost At 1 January 14,870 - 14,870 15,020 Additions 2,024 526 2,550 - Exchange movement (1,192) - (1,192) (150) At 31 December 15,702 526 16,228 14,870 Amortisation At 1 January 6,422 - 6,422 4,705 Charge for the year 2,072 35 2,107 1,775 Exchange movement (184) - (184) (58) At 31 December 8,310 35 8,345 6,422 Net book value 7,392 491 7,883 8,448 Goodwill 56 On April 18, 2002, the Group’s partner in Kievrianta LLC redeemed its shares in the company. As a result the Group’s shareholding in Kievrianta LLC increased to 99% and that company is now accounted for as a subsidiary undertaking having previously been accounted for as an associated undertaking. In accordance with Financial Reporting Standard 2: “Accounting for Subsidiary Undertakings” (FRS 2), and in order to give a true and fair view, purchased goodwill has been calculated as the sum of the goodwill arising on each purchase of shares in Kievrianta LLC, being the difference at the date of each purchase between the fair value of the consideration given and the fair value of the identifiable assets and liabilities attributable to the interest purchased. This represents a departure from the statutory method, under which goodwill is calculated as the difference between cost and fair value on the date that Kievrianta LLC became a subsidiary undertaking. The statutory method would not give a true and fair view because it would result in the Group’s share of Kievrianta LLC’s retained reserves, during the period that it was an associated undertaking, being recharacterised as goodwill. The effect of this departure is to increase retained profits by €1.318 million and to increase purchased goodwill by €1.318 million. The consideration payable to the Group’s partner for the shares redeemed was €2.099 million. The total net assets in Kievrianta LLC on the date it became a subsidiary, and the share of net assets on that date were as follows: Total net assets Share of net assets acquired €000 €000 Fixed assets 529 265 Stocks 1,494 747 Debtors 116 58 Creditors (1,346) (673) Net assets at fair value excluding cash 793 397 Goodwill arising on acquisition 526 923 Satisfied by: Deferred payment 2,099 Cash transferred on acquisition 2,352 Less: existing share of cash (1,176) (1,176) 923 Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 10 Intangible assets (continued) The deferred consideration of €2.099 million in respect of the acquisition will be paid in April 2003, and is included in other creditors at 31 December 2002. The fair value of the net assets acquired equalled the book value of net assets acquired except for a fair value adjustment of €65,000 in relation to creditors which relates to the write back of a provision. The directors are confident that a payment will not be made in respect of the provision. The goodwill arising on the acquisition will be amortised over ten years which is the term of the concession agreement held by Kievrianta LLC. 11 Fixed assets – financial 1 January Movements 31 December 2002 during the year 2002 €000 €000 €000 Group Joint venture undertakings Share of gross assets 20,055 554 20,609 Share of gross liabilities (26,248) 1,220 (25,028) Loans to joint venture undertaking 4,882 - 4,882 (1,311) 1,774 (a) 463 57 Associated undertakings Equity interest at cost 101,277 (4,313) (b) 96,964 Goodwill 1,953 (99) 1,854 Loans to associated undertakings 491 79 570 Share of post acquisition profits 59,721 15,675 (b) 75,396 Dividends paid (23,309) (3,571) (26,880) Translation reserve 11,952 (4,378) 7,574 152,085 3,393 155,478 Other financial assets Other unlisted investments at cost 27,270 (149) 27,121 Listed investments at cost 2,955 - 2,955 (c) 30,225 (149) 30,076 Total financial assets 180,999 5,018 186,017 Company Ordinary shares in subsidiary undertakings at cost 24,339 (583) 23,756 Subordinated loans to subsidiary undertakings 89,485 (84,407) (d) 5,078 Other loans to subsidiary undertakings 13,527 84,407 97,934 Investment in joint venture undertaking 5,081 - 5,081 132,432 (583) 131,849 (a) The movement in investment in joint venture undertaking during the year relates to an increase in the share of retained profits. (b) During the year the Group received a refund of €4.09 million in respect of the investment in an associated undertaking in accordance with the provisions of the purchase agreement for that investment. Also during the year the Group’s subsidiary, Aer Rianta International cpt, increased its holding of shares in Kievrianta LLC (see note 10). The initial investment of €0.222 million in Kievrianta LLC has been transferred from investments in associated undertakings, and share of profits in associated undertakings has been reduced by €1.045 million, as Kievrianta is now accounted for as a subsidiary undertaking. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 11 Fixed assets - financial (continued) (c) The market value of listed investments at 31 December 2002 was €1.4 million. The Group through its subsidiary, Aer Rianta International cpt, is entitled, subject to completion of that company’s obligations under a management agreement, to resell these shares at cost. The Group expects that these obligations will be met. (d) During 2002 subordinated loans to subsidiary undertakings of €84.4 million became unsubordinated. In the opinion of the directors, the realisable value of the investments is not less than the book amounts shown above. The principal operating subsidiary, associated and joint venture undertakings of the Group, all of which are included in the Group financial statements, are as set out below: Undertaking Registered office Nature of business % holding of ordinary shares Subsidiary undertakings Aer Rianta Finance plc Dublin, Ireland Financing company 100 Aer Rianta International cpt Shannon, Ireland International management 100 services and airport investor Great Southern Hotels Limited Dublin, Ireland Hotel operator 100 Aer Rianta International (North America) Inc. Montreal, Canada Duty-free shopping and related activities 100 Kievrianta LLC Kiev, Ukraine Duty-free shopping and related activities 99 Associated undertakings Birmingham International Airport Limited Birmingham, England Airport 24.125 58 Airport Partners GmbH (1) Düsseldorf, Germany Airport investor 40 Aer Rianta International (Middle East) W.L.L. Manama, Bahrain Duty-free shopping and related activities 49 Lenrianta JSC St. Petersburg, Russia Duty-free shopping and related activities 48.3 Aerofirst JSC Moscow, Russia Duty-free shopping and related activities 33.3 Global Travel Management S.A. Athens, Greece Consultancy 45 Omnistone Limited Cork, Ireland Cork Airport Business Park development 25 Hamburg Airport Partners GmbH Hamburg, Germany Airport investor 20 Joint venture undertakings Turckton Developments Limited Dublin, Ireland Business park development 50 (1) The Group has a beneficial interest of 20% in the share capital of Flüghafen Düsseldorf GmbH (Düsseldorf Airport) through its investment in Airport Partners GmbH. All financial statements of subsidiary, associated and joint venture undertakings are co-terminous with the year-end of the Group other than in respect of Birmingham International Airport Limited and Aer Rianta Finance plc whose financial statements are prepared to 31 March and 28 February year-ends respectively. Management accounts of these entities have been prepared to 31 December 2002 for the purposes of including the results of these companies in the Group financial statements. Transactions between the Group and its associated and joint venture undertakings are detailed in note 27. 12 Stocks Group Company 2002 2001 2002 2001 €000 €000 €000 €000 Goods for resale 17,516 18,416 10,227 13,157 Maintenance 1,406 1,801 1,373 1,398 18,922 20,217 11,600 14,555 The replacement value of stocks is not materially different from the carrying amounts. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 13 Debtors Group Company 2002 2001 2002 2001 €000 €000 €000 €000 Trade debtors 25,024 19,454 22,834 16,618 Due from subsidiary undertakings - - 33,220 16,709 Due from associated undertakings 776 3,277 - - VAT 1,423 2,745 1,089 2,477 Other debtors 9,943 7,894 8,536 6,783 37,166 33,370 65,679 42,587 Debtors of €5.1 million (2001: €4.5 million), in the Group and debtors of €37.6 million (2001: €19.3 million) in the Company, fall due after more than one year. 14 Creditors: amounts falling due within one year Bank loans (note 16) 17,386 17,452 15,925 15,801 Bank overdraft - 923 - - Trade creditors 15,077 30,981 5,038 26,841 Due to subsidiary undertakings - - 22,126 11,947 Other creditors 27,949 24,766 10,489 8,988 Accruals and deferred income 75,041 64,823 67,743 57,087 59 135,453 138,945 121,321 120,664 Tax included in other creditors: Corporation tax 3,089 2,995 2,607 2,607 Capital gains tax 777 1,623 36 - PAYE 2,827 2,873 2,571 2,700 PRSI 1,720 1,959 1,578 1,795 Withholding tax 85 35 - - 15 Creditors: amounts falling due after more than one year Bank loans (note 16) 206,506 98,884 74,046 89,965 Other creditors 8,186 6,559 8,186 6,558 Loan notes (note 16) 248,752 248,635 - - Due to subsidiary undertakings - - 374,000 249,000 463,444 354,078 456,232 345,523 Other creditors of €5.91 million (2001: €4.5 million), Group and Company, fall due after more than five years. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 16 Financial liabilities Group Company 2002 2001 2002 2001 €000 €000 €000 €000 Repayable by instalments: Repayable within one year 17,386 17,452 15,925 15,801 Repayable within one to two years 17,336 17,386 16,066 15,925 Repayable within two to five years 62,012 52,450 46,488 48,641 Repayable after five years 127,158 29,048 11,492 25,399 223,892 116,336 89,971 105,766 Repayable by other than instalments: Repayable within one year - 923 - - Repayable after five years 248,752 248,635 - - 248,752 249,558 - - 472,644 365,894 89,971 105,766 Included in creditors falling due within one year 17,386 18,375 15,925 15,801 60 Included in creditors falling due after more than one year 455,258 347,519 74,046 89,965 Included above are amounts of €10.3 million (2001: €11.6 million), Group and Company, which are guaranteed by the Irish State. The Group through its subsidiary Aer Rianta Finance plc has in issue €250 million of loan notes repayable in 2011 at a fixed rate of 6.15% payable annually, which is included in financial liabilities repayable other than by instalments above. All amounts payable to noteholders are guaranteed by Aer Rianta cpt. Borrowing Facilities The Group has various undrawn committed borrowing facilities. At 31 December 2002 the undrawn committed facilities available in respect of which all conditions precedent had been met were as follows: 2002 €000 Expiring in one year or less 34,791 Expiring in more than one year but not more than two years 5,047 Expiring in more than two years but not more than five years 21,142 Expiring in more than five years 18,000 Total 78,980 17 Capital grants Group Company 2002 2001 2002 2001 €000 €000 €000 €000 At 1 January 32,150 33,873 31,045 32,769 Amortised to profit and loss account (1,713) (1,723) (1,714) (1,724) At 31 December 30,437 32,150 29,331 31,045 A liability could arise to repay in whole, or in part, grants received, totalling €0.079 million (2001: €0.079 million), Group and Company, if certain circumstances set out in the grant agreements occur within ten years of the date of acceptance of these grants. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 18 Provisions for liabilities and charges Deferred tax Restructuring Total (note 4) Group €000 €000 €000 At 1 January 2002 1,494 28,500 29,994 Charge for the year (note 7) 1,331 - 1,331 Utilised in year - (18,697) (18,697) At 31 December 2002 2,825 9,803 12,628 Company At 1 January 2002 (1,540) 28,500 26,960 Charge for the year (note 7) 1,775 - 1,775 Utilised in year - (18,697) (18,697) At 31 December 2002 235 9,803 10,038 The deferred tax provision at 31 December 2002 in the Group of €2.8 million was made up of €5.1 million in respect of timing differences on capital allowances, less €1.1 million in relation to tax losses carried forward and less €1.2 million reflecting amounts not deductible for corporation tax in the current year. 61 In the Company the deferred tax provision at 31 December 2002 of €0.2 million was made up of €1.6 million in respect of timing differences on capital allowances, less €1.4 million reflecting amounts not deductible for corporation tax in the current year. 19 Called up share capital - equity Group and Company 2002 2001 €000 €000 Authorised: 250,000,000 ordinary shares of €1.27 each 317,500 317,500 Allotted, called up and fully paid: At 1 January - 146,721,889 ordinary shares of €1.27 each (IR£1.00 each) 186,337 186,299 Renominalisation of share capital - 38 At 31 December – 146,721,889 of ordinary shares of €1.27 each 186,337 186,337 All the ordinary shares are beneficially held by the Minister for Finance. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 20 Reserves Profit & loss Translation Other Total account reserve reserves reserves €000 €000 €000 €000 Group At 1 January 2002 172,602 10,776 2,523 185,901 Retained profit for the year 36,223 - - 36,223 Currency translation adjustment - (5,132) - (5,132) At 31 December 2002 208,825 5,644 2,523 216,992 As follows: Aer Rianta cpt 65,358 - - 65,358 Subsidiary undertakings 92,958 (1,930) 2,277 93,305 Joint venture undertakings 2,239 - - 2,239 Associated undertakings 48,270 7,574 246 56,090 208,825 5,644 2,523 216,992 62 21 Reconciliation of operating profit to cash inflow from operating activities Group 2002 2001 €000 €000 Operating profit 33,274 41,958 Depreciation charge 35,671 30,608 Amortisation of intangible assets 2,107 1,775 Amortisation of financial assets 99 - Tangible fixed asset write-offs 202 63 Amortisation of capital grants (1,713) (1,723) Profit on sale of tangible fixed assets (66) (165) Decrease in stocks 2,789 472 (Increase)/decrease in debtors (2,658) 3,700 (Decrease)/increase in creditors (6,409) 6,209 63,296 82,897 Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 22 Analysis of headings grouped in cash flow statement Group 2002 2001 €000 €000 Returns on investments and servicing of finance Interest received 1,397 3,676 Interest paid (21,093) (9,186) Investment income 1,344 298 (18,352) (5,212) Capital expenditure and financial investment Purchase of tangible fixed assets (94,963) (114,590) Sale of tangible fixed assets 6,953 311 Investment in financial assets - (13,264) Sale of financial assets - 5,272 (88,010) (122,271) Acquisitions and disposals 63 Adjustment to consideration for associated undertakings 4,090 - Net cash acquired with subsidiary 2,352 - Investment in associated undertakings - (397) Loan to associated undertaking (79) (491) Loan to joint venture undertaking - (3,612) 6,363 (4,500) Financing Net proceeds from issue of loan notes - 248,542 New bank loans 125,000 5,079 Repayments of amounts borrowed (17,444) (158,865) 107,556 94,756 23 Reconciliation of net cash flow to movement in net debt Group 2002 €000 Increase in cash in the year 6,100 Increase in liquid resources 48,697 Increase in debt (107,556) Change in net debt resulting from cash flows (52,759) Non-cash movements (117) Foreign exchange movements (2,347) Movement in net debt in the year (55,223) Net debt at 1 January 2002 (320,566) Net debt at 31 December 2002 (375,789) Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 24 Analysis of net debt At Cash Non-cash Foreign At 1 January flow movement exchange 31 December 2002 movement 2002 €000 €000 €000 €000 €000 Cash 19,933 5,177 - (2,347) 22,763 Bank overdraft (923) 923 - - - Liquid resources 25,395 48,697 - - 74,092 44,405 54,797 - (2,347) 96,855 Debt due within one year (17,452) 17,444 (17,378) - (17,386) Debt due after one year (347,519) (125,000) 17,261 - (455,258) (364,971) (107,556) (117) - (472,644) Total (320,566) (52,759) (117) (2,347) (375,789) 25 Financial instruments Narrative disclosures concerning the Group's treasury policy and management are set out in the Financial Review. The required disclosures in respect of relevant financial assets and liabilities (as defined) in accordance with Financial Reporting Standard 13 (FRS 13) "Derivatives and 64 Other Financial Instruments" are provided below. Relevant financial assets/liabilities exclude short-term debtors and creditors and investments in shares in subsidiaries, associated undertakings and joint ventures. (i) Interest rate risk profile of financial liabilities and assets After taking into account, where relevant, the various interest rate swaps and forward foreign currency contracts entered into by the Group, the interest rate profile of the Group's relevant financial liabilities and interest bearing relevant financial assets at 31 December 2002 was: Total Floating rate Fixed rate €000 €000 €000 Financial liabilities Euro 472,644 69,324 403,320 Financial assets Euro 86,589 86,589 - Sterling 1,638 1,638 - US dollar 6,017 6,017 - Canadian dollar 2,607 2,607 - Hong Kong dollar 4 4 - 96,855 96,855 - The weighted average interest rate for fixed rate euro currency financial liabilities was 5.9% (2001: 6.3%) and the weighted average period for which the rate is fixed was 10.9 years (2001: 8.8 years). There were no financial liabilities on which no interest is paid. The floating rate financial liabilities were comprised of bank borrowings that bore interest at rates on up to twelve-month EURIBOR. The floating rate financial assets were comprised of term and call bank deposits of less than one year that bore interest based on market rates. No interest is received on loans to associates and joint venture undertakings or on listed or unlisted investments. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 25 Financial instruments (continued) (ii) Currency exposures The table below shows the Group’s currency exposure, being those assets and liabilities (or non-structural exposures) that give rise to the net monetary gains and losses recognised in the profit and loss account. Such exposures comprise the monetary assets and liabilities of the Group that are not denominated in the functional currency of the unit involved. These exposures were as follows: Net foreign currency monetary assets €000 As at 31 December 2002 Sterling US dollar Canadian dollar Functional currency of Group operations Euro 439 7,430 221 Canadian dollar - 29 - 439 7,459 221 Net foreign currency monetary assets €000 As at 31 December 2001 Sterling US dollar Canadian dollar Functional currency of Group operations Euro 1,432 14,179 214 65 Canadian dollar - 22 - 1,432 14,201 214 The amounts shown in the table above take into account the effect of any currency swaps, forward contracts and other derivatives entered into to manage these currency exposures. (iii) Fair values of financial liabilities and assets Set out below is a comparison by category of book values and fair values of the Group’s relevant financial liabilities as at 31 December 2002. Book Value Fair Value €000 €000 Primary financial instruments held or issued to finance the Group’s operations Short-term financial liabilities and current position of long-term borrowings (note 16) 17,386 18,209 Long-term borrowings (note 16) 455,258 474,887 472,644 493,096 Derivative financial instruments held to manage the interest rate and currency profile: Interest rate swaps - (526) Derivative financial instruments held or issued to hedge the currency exposure on expected future sales: Forward foreign exchange contracts - 141 Where available, market values have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting expected cash flows at prevailing interest rates. At the balance sheet date the fair values of the relevant financial assets and other creditors falling due after more than one year were not materially different from their carrying value other than as indicated in note 11 in respect of listed investments. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 25 Financial instruments (continued) (iv) Hedges As set out in the Financial Review, the Group enters into forward foreign currency contracts to eliminate the currency exposure that arises on cash flows denominated in foreign currencies. It also uses interest rate swaps and forward rate agreements to manage its interest rate profile. As set out in the Statement of Accounting Policies, changes in the fair value of instruments used as hedges are not recognised in the financial statements until the hedged position matures. An analysis of these unrecognised gains and losses is as follows: Gains Losses Total net gains/(losses) €000 €000 €000 Unrecognised gains and losses on hedges on 1 January 2002 23 (310) (287) Gains and losses arising in previous years recognised in 2002 23 (55) (32) Gains and losses arising before 1 January 2002 not recognised in 2002 - (255) (255) Gains and losses arising in 2002 not recognised in 2002 141 (271) (130) Unrecognised gains and losses on hedges at 31 December 2002 141 (526) (385) 66 Of which: Gains and losses expected to be recognised in 2003 141 (77) 64 Gains and losses expected to be recognised in 2004 or later - (449) (449) 141 (526) (385) 26 Commitments Group Company 2002 2001 2002 2001 €000 €000 €000 €000 (i) Capital commitments Contracted 20,187 38,896 14,468 22,221 Authorised by the directors but not contracted for 63,224 84,526 63,224 82,621 At 31 December 83,411 123,422 77,692 104,842 (ii) Operating leases Leasing commitments payable during the next twelve months were made up as follows: Plant and equipment Payable on leases which expire within: One year 55 51 - - Two to five years 1,554 1,733 1,525 1,689 1,609 1,784 1,525 1,689 Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 26 Commitments (continued) Group Company 2002 2001 2002 2001 €000 €000 €000 €000 Buildings Payable on leases which expire within: Two to five years 6,774 8,476 - - (iii) Other commitments In the normal course of business the Group’s fuel aviation supply business enters into commitments for the future supply of aviation fuel for resale to customers at one of its airports. At 31 December 2002, the value of such fuel purchase commitments for periods up to March 2004 pursuant to fuel supply agreements was €39.3 million (2001: €48 million). 27 Related party disclosures The related parties of the Group, as defined by Financial Reporting Standard 8 (FRS 8) "Related Party Disclosures", the nature of the relationship and the extent of transactions with them (excluding subsidiary undertakings), are summarised below. 2002 2001 67 €000 €000 Management charges to associated undertakings 6,270 6,247 Charges to associated undertakings in respect of services provided by the Group 1,363 2,100 Sales at cost to associated undertakings 1,535 1,329 Payments made by the Group on behalf of associated undertakings 618 4,378 Due from associated undertakings at year end 1,346 3,768 Dividends received from associated undertakings 4,456 5,268 Due from joint venture undertakings at year-end 4,882 4,882 In common with many other government and state bodies, the Group deals in the normal course of business with other government and state bodies, such as Aer Lingus, ESB, An Post, Irish Aviation Authority and the Department for Transport. Details of the Group's principal associated and joint venture undertakings are set out in note 11. 28 Minority interest Duty Free Opportunities (Asia) Limited is the minority partner (35%) in Aer Rianta International (East Asia) Limited, and a minority party (1%) in Kievrianta LLC. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 29 Associates and joint ventures In accordance with the requirements of Financial Reporting Standard 9 (FRS 9): "Associates and Joint Ventures", the following additional information is given about associated and joint venture undertakings which play a significant part in the operations of the Group where applicable. The Group’s share of turnover, fixed assets, current assets, liabilities due within one year and liabilities due after more than one year of all associated undertakings is as follows: 2002 2001 €000 €000 Turnover 152,564 151,145 Fixed assets 319,723 301,631 Current assets 52,935 51,450 Liabilities due within one year (49,023) (37,916) Liabilities due after one year or more (227,688) (184,469) The capital development programme of all associated undertakings amounts to some €496 million over the next five years. The Group’s share of the results, assets and liabilities of Airport Partners GmbH (an associated undertaking which exceeds certain size criteria set down in FRS 9) is as follows: Turnover 62,820 63,563 Profit before tax 11,738 2,893 68 Taxation (6,969) (1,374) Profit after tax 4,769 1,519 Fixed assets 218,345 215,687 Current assets 9,399 13,944 Liabilities due within one year (27,144) (12,899) Liabilities due after one year or more (166,416) (155,215) Profit before tax in 2002 included an exceptional gain and exceptional operating costs, the Group’s share of which amounted to €14.0 million and €2.0 million respectively. Consistent accounting policies are adopted by the Group except as follows: Airport Partners GmbH - accounting for pensions in Flüghafen Düsseldorf GmbH (FDG), which is a member of the Supplementary Pension Fund of the state capital of Düsseldorf (Zusatzvers orgungsuasse, ZVK). As a member of ZVK, Flüghafen Düsseldorf GmbH is obliged to register all qualifying employees with ZVK. The qualifying employees have a direct claim against ZVK for payment of old age and surviving dependants' benefits. It is not practical to amend this accounting policy to accord with the Group's treatment of same nor is it possible to quantify the effect of the differences in accounting treatment in the Group financial statements at this time. Birmingham International Airport Limited has adopted a policy of revaluing assets whereas the Group does not have such a policy. The share of profits and share of net assets included in the Group’s financial statements have been calculated in accordance with the Group’s accounting policies and adjusted to eliminate the impact of revaluation of assets in Birmingham International Airport Limited. 30 Pensions The Group operates, or participates in, pension schemes in respect of the parent company and its principal subsidiary undertakings covering the majority of its employees. The pension scheme assets are held in separate, Revenue approved, trustee administered funds. The Group continues to account for pensions in accordance with Statement of Standard Accounting Practice No. 24 (SSAP 24): ‘Accounting for Pension Costs’. The pension cost to the Group for the financial year amounted to €6.186 million (2001: €4.352 million). The actuarial valuations of the Irish Airlines (General Employees) Superannuation Scheme and the Great Southern Hotels Scheme are available for inspection by members of the schemes and their dependants but not by the general public. Aer Rianta cpt The majority of the Group’s employees are those of the parent company, Aer Rianta cpt, whose permanent employees over the age of twenty are members of the Irish Airlines (General Employees) Superannuation Scheme. This scheme is operated in conjunction with a number of other employers. The Company’s current and past employees comprise a minority of the membership of this multi-employer scheme. Aer Rianta cpt Annual Report and Accounts 2002 Notes (continued) for the year ended 31 December 2002 30 Pensions (continued) The Company and employees contribute a fixed percentage of salaries each year to this scheme which does not vary according to the funded level of the scheme. Accordingly, no additional disclosures in the context of reporting under Financial Reporting Standard 17 (FRS 17), “Retirement Benefits” are required. The pension cost to the Group for the financial year in relation to this scheme amounted to €5.571 million (2001: €3.790 million). It is the intention of the Company, subject to Ministerial approvals, to set up its own defined benefit pension scheme for eligible Aer Rianta cpt employees. Aer Rianta International cpt Aer Rianta International cpt operates a defined contribution pension scheme for all its full time permanent employees who have attained the age of 24 years. The pension cost in relation to this scheme for the financial year amounted to €0.272 million (2001: €0.225 million). Great Southern Hotels Group (a) SSAP 24 " Accounting for pension costs" disclosures Great Southern Hotels Group operates a revenue approved defined benefit pension scheme covering that Group's permanent employees over the age of twenty. The contributions payable to the scheme by the Group and the members are laid down in the scheme rules and are made in accordance with the advice of an independent qualified actuary and an actuarial valuation of the assets and liabilities of the scheme is carried out at intervals of three years. The latest actuarial valuation of the scheme was carried out on 1 May 2000 using the Aggregate Funding Method. For the purposes of the valuation it was assumed that the long-term rate of investment return would exceed the general level of salary inflation by 2% per annum and that the age of retirement would be 65 for all members. The actuarial valuation disclosed that the scheme is adequately funded on a discontinuance basis. The actuarial valuation also disclosed that the mid-market value of the scheme's assets amounted to €8.4 million and that the level of funding was in excess of 100%. 69 The cost in relation to this scheme for the financial year amounted to €0.343 million (2001: €0.337 million). (b) FRS 17 "Retirement Benefits" disclosures An independent actuarial review as at 31 December 2002 disclosed a net deficit of the present value of accrued scheme liabilities of €3.3 million (2001: €Nil) over the total fair value of assets. Had FRS 17 been reflected in the primary financial statements of the Great Southern Hotels Group, the following are the amounts that would have been included in the Profit and Loss Account and the Statement of Total Recognised Gains and Losses: 2002 €000 Net charge to operating profit 391 Net decrease in finance costs 90 Net movement included in statement of total recognised gains and losses (3,372) The full disclosures required under FRS 17 are set out in the consolidated financial statements of Great Southern Hotels Limited. 31 Comparative figures The comparative figures have been regrouped where necessary on the same basis as those for the current year. 32 Approval of financial statements The financial statements were approved by the Board on 26 March 2003. Aer Rianta cpt Annual Report and Accounts 2002 Five year summary of financial results 2002 2001 2000 1999 1998 €000 €000 €000 €000 €000 Operating results Turnover 420,874 438,320 424,992 371,949 338,216 Group EBITDA 69,804 72,553 84,749 72,366 77,520 Group operating profit 33,274 41,958 57,627 49,336 60,925 Share of profits of associates, joint ventures and investment income 43,982 25,543 25,443 15,990 15,511 Net interest payable – Group joint ventures and associates (32,912) (26,083) (17,721) (11,704) (11,650) Exceptional items 6,056 (23,228) - - 1,648 Profit before taxation 50,400 18,190 65,349 53,622 66,434 Taxation (14,172) (6,627) (19,739) (14,231) (5,675) Minority interest (5) 4 6 24 183 Profit for the financial year 36,223 11,567 45,616 39,415 60,942 70 Capital employed Tangible fixed assets 698,394 638,943 545,836 491,690 370,818 Intangible assets 7,883 8,448 10,315 11,495 11,047 Financial assets 186,017 180,999 153,788 108,052 97,513 Net current assets/(liabilities) 17,490 (40,030) (52,312) (67,389) (33,596) Total assets less current liabilities 909,784 788,360 657,627 543,848 445,782 Creditors over one year (463,444) (354,078) (263,529) (202,152) (145,280) Capital grants (30,437) (32,150) (33,873) (35,621) (37,409) Provisions for liabilities and charges (12,628) (29,994) (2,385) (429) (542) Net assets 403,275 372,138 357,840 305,646 262,551 Aer Rianta cpt Annual Report and Accounts 2002 Five year summary of financial results (continued) 2002 2001 2000 1999 1998 €000 €000 €000 €000 €000 Summary Cash Flow Cash flow from operating activities 63,296 82,897 78,771 62,602 86,992 Payments in respect of exceptional restructuring programme (18,697) - - - - Dividends from associated undertakings 3,571 5,268 2,931 664 757 48,170 88,165 81,702 63,266 87,749 Net interest paid/investment income (18,352) (5,212) (11,655) (7,367) (7,503) Corporation tax paid (930) (10,406) (9,537) (629) (1,318) 28,888 72,547 60,510 55,270 78,928 Investment in tangible fixed assets (94,963) (114,590) (94,316) (132,085) (84,269) Capital grants received - - - 25 4,741 Investment in/loans to associated and joint venture undertakings and financial assets 4,011 (17,764) (23,669) 2,220 - Purchase of subsidiary undertakings including the related financial assets 2,352 - - - (13,472) Sale of tangible and other assets and subsidiary undertakings 6,953 5,583 - 88 8,547 (81,647) (126,771) (117,985) (129,752) (84,453) 71 (52,759) (54,224) (57,475) (74,482) (5,525) Dividends/surrender to shareholder - - - - (18,919) Cash out flow before management of liquid resources and financing (52,759) (54,224) (57,475) (74,482) (24,444) Net debt Group net debt at year end 375,789 320,566 266,253 208,262 131,765 Aer Rianta cpt Annual Report and Accounts 2002 Five year summary of passenger statistics Passengers 2002 2001 2000 1999 1998 Overall Transatlantic 1,417,268 1,616,680 1,649,446 1,462,686 1,223,028 Great Britain 9,615,579 9,127,224 9,122,192 8,725,929 8,276,664 Europe 6,677,365 6,012,375 5,362,380 4,541,645 3,821,266 Domestic 1,042,135 1,121,304 1,135,880 1,054,252 931,247 Transit 560,297 636,447 662,042 707,647 544,127 Total 19,312,644 18,514,030 17,931,940 16,492,159 14,796,332 Percentage growth year-on-year +4.3% +3.2% +8.7% +11.5% +10.8% Dublin Transatlantic 798,902 939,329 966,451 829,759 674,328 Great Britain 7,884,031 7,438,259 7,419,183 7,226,495 6,919,221 Europe 5,627,552 5,169,717 4,644,792 3,989,831 3,384,545 Domestic 650,965 656,834 661,062 610,962 539,444 Transit 123,217 129,416 152,040 144,984 123,562 Total 15,084,667 14,333,555 13,843,528 12,802,031 11,641,100 Percentage growth year-on-year +5.2% +3.5% +8.1% +9.9% +12.7% 72 Shannon Transatlantic 617,877 677,068 682,715 632,780 548,559 Great Britain 702,313 714,285 751,176 609,587 557,117 Europe 495,324 363,251 317,264 221,089 170,475 Domestic 117,871 158,362 164,665 182,070 158,425 Transit 420,145 491,692 492,432 542,628 405,432 Total 2,353,530 2,404,658 2,408,252 2,188,154 1,840,008 Percentage growth year-on-year -2.1% -0.1% +10.1% +18.9% +1.0% Cork Transatlantic 489 283 280 147 141 Great Britain 1,029,235 974,680 951,833 889,847 800,326 Europe 554,489 479,407 400,324 330,725 266,246 Domestic 273,299 306,108 310,153 261,220 233,378 Transit 16,935 15,339 17,570 20,035 15,133 Total 1,874,447 1,775,817 1,680,160 1,501,974 1,315,224 Percentage growth year-on-year +5.6% +5.7% +11.9% +14.2% +9.9% Terminal freight including mail (metric tonnes) Dublin 116,739 140,126 150,023 145,391 134,650 Shannon 48,094 50,181 53,398 45,974 44,037 Cork 12,852 11,743 10,894 11,047 12,818 Total 177,685 202,050 214,315 202,412 191,505 Percentage growth year-on-year -12.0% -5.7% +5.9% +5.7% +12.5% Aer Rianta cpt Annual Report and Accounts 2002 Five year summary of aircraft movements 2002 2001 2000 1999 1998 Aircraft movements Overall Commercial - Scheduled 187,993 193,329 188,912 172,686 162,266 - Non Scheduled 27,961 27,235 25,573 24,937 22,573 - Training 24,489 35,401 42,325 38,775 32,663 Others 23,211 28,302 27,646 28,549 28,102 Total 263,654 284,267 284,456 264,947 245,604 Percentage growth year-on-year -7.2% -0.1% +7.4% +7.9% +6.6% Dublin Commercial - Scheduled 151,069 154,910 145,976 140,154 132,558 - Non-Scheduled 15,604 15,152 16,221 12,944 12,259 - Training 1,937 1,390 1,328 1,522 1,092 Others 13,265 14,250 16,720 15,801 16,177 Total 181,875 185,702 180,245 170,421 162,086 Percentage growth year-on-year -2.0% +3.0% +5.8% +5.1% +7.8% 73 Shannon Commercial - Scheduled 17,528 18,915 19,657 16,308 14,218 - Non Scheduled 8,693 7,996 7,925 8,946 7,528 - Training 5,646 13,402 18,745 18,825 16,663 Others 4,996 7,671 7,540 7,335 7,367 Total 36,863 47,984 53,867 51,414 45,776 Percentage growth year-on-year -23.2% -10.9% +4.7% +12.3% +13.9% Cork Commercial - Scheduled 19,396 19,504 23,279 16,224 15,490 - Non Scheduled 3,664 4,087 1,427 3,047 2,786 - Training 16,906 20,609 22,252 18,428 14,908 Others 4,950 6,381 3,386 5,413 4,558 Total 44,916 50,581 50,344 43,112 37,742 Percentage growth year-on-year -11.2% +0.5% +16.8% +14.2% -5.4% Aer Rianta cpt Annual Report and Accounts 2002 General Business and Aeronautical Information Dublin Airport Shannon Airport Location Lat.532517N, Long.061612W Location Lat. 524207N, Long. 085529W (midpoint runway 10/28) Elevation 46ft. AMSL Elevation 242 ft. AMSL Runway Data 06/24 Length 3199 metres Runway Data 10/28 Length 2637 metres Width 45 metres plus 8m shoulders each side Width 45 metres Surface asphalt, Category 2 plus 7.5 m shoulders each side Surface concrete, Category 3 (runway 28) Category 2 (runway10) 13/31 Length 1720 metres Width 45 metres 16/34 Length 2072 metres Surface asphalt - concrete Width 61 metres N.Inst Surface asphalt, Category 1 (runway 16) Refueling Full refueling facilities available Non inst (runway 34) Operational Hrs 24 hrs Postal Address Shannon Airport, Co.Clare, Ireland 11/29 Length 1357 metres Fax Number (061) 712282 (Airport Operations Dept) Width 61 metres (061) 471719 (Shannon Aviation Fuels) Surface asphalt – concrete Telephone Number National (061) 712000 (24 hr) N. Inst Intl 353-61-712000 (24 hr) Refueling Full refueling facilities available Web www.shannonairport.com – AVGAS 100 LL, JET A1 Sita SNN RRCR Operational Hrs 24 hrs 74 Postal Address Dublin Airport, Co. Dublin, Ireland Fax Number (01) 814 1034 (09:00 – 17: 00) (01) 814 4643 (24hrs) Telephone Number National (01) 814 1111 Intl 353-1 – 814 1111 Web www.dublinairport.com Sita DUBRB7X (Airport Administration) DUBYREI (Operations) Cork Airport Location Lat.515029N, Long. 082928W Elevation 502 ft . AMSL Runway Data 17/35 Length 2133 metres Width 45 metres plus 7.5 m shoulders each side Surface asphalt, Category 2 07/25 Length 1310 metres Width 45 metres Surface concrete N. Inst. Refueling Full refueling facilities available Operational Hrs 24 hrs Postal Address Cork Airport, Co. Cork, Ireland Fax Number (021) 431 3442 Telephone Number National (021) 431 3131 Intl 353 – 21- 431 3131 Web www.corkairport.com Sita ORKKFEI Aer Rianta cpt Annual Report and Accounts 2002 General Business and Aeronautical Information (continued) Aer Rianta Head Office, Old Central Terminal Building Dublin Airport, Co.Dublin, Ireland Tel: (01) 814 1111 Intl 353 1 814 1111 Fax: (01) 814 4120 Intl 353 1 814 4120 Web: www.aerrianta.com Registered Office Dublin Airport, Co.Dublin, Ireland Aer Rianta Head Office, Shannon Airport, International Co. Clare, Ireland. Tel: (061) 712 777 Intl 353 61 712 777 Fax: (061) 474 595 Intl 353 61 474 595 Web: www.ari.ie Aer Rianta 4th Floor, Falcon Tower Building, International Diplomatic Area, P.O. Box 5334, 75 Middle East Manama, Bahrain. Tel: 00 973 537979 Fax: 00 973 533741 Aer Rianta Finance Old Central Terminal Building, Dublin Airport, Co.Dublin, Ireland Tel: (01) 814 1111 Intl 353 1 814 1111 Great Southern Head Office, Hotels 6, Charlemont Terrace, Dun Laoghaire, Co. Dublin, Ireland Tel: (01) 214 4800 Intl 353 1 214 4800 Fax: (01) 214 4805 Intl 353 1 214 4805 Web: www.greatsouthernhotels.com Auditors KPMG 1, Stokes Place, St. Stephens Green, Dublin 2 Principal Bankers Bank of Ireland Allied Irish Banks design by www.reddog.ie Annual Report & Accounts 2002 Aer Rianta’s strategy is to be a premier Irish international airport owner and operator, meeting the needs and expectations of customers, using resources effectively, fully realising the capabilities and potential of staff and optimising long-term shareholder value. The Group’s core business is the development, operation and management of the three principal Irish airports, Irish and international airport retail management and international airport investment.